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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, [...]

ROE = Net Profit After Tax & Minority Interest / Average Shareholders Funds ROE is a popular measure of how efficient a company is using its funds to generate income for its shareholders. Unlike Return on Capital Employed, it does not take into account a company’s gearing position. For example, a company can increase its [...]

Capital Employed is also sometimes referred to as Funds Employed. It is basically the total of a company’s Business Assets (excluding its Cash holdings) less its Trade-related Liabilities. Capital Employed = Net Assets – Cash + Borrowings