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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