Return on Capital Employed (ROCE)
ROCE is a good indicator was to how well a company’s management is using its business assets to generate earnings.
ROCE = EBIT / Average Capital Employed
where EBIT is the Earnings Before Interest and Tax
Example: Petronas Dagangan Bhd
PETDAG’s earnings for the year ending 31-Mar-07 were reported as follows:
As per the above, its Average Capital Employed
(2641+3004.2) / 2= RM2,822.6 million
ROCE = 711.2 / 2822.6 = 25.2%
This means that the company is achieving a return of 25.2% on its business assets
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I would normally agree with you but comeon, we are talking about...
August 17th, 2010 at 4:05 pm
hi there,
May i know how to get the figures for Average Capital Employed state d above?
August 17th, 2010 at 4:35 pm
Average Capital Employed is simply the average of year 1 and Year 2 Capital Employed. In the example of Petronas Dagangan above, Capital Employed for 2006 and 2007 were RM2,641 million and RM3,004.2 million respectively.