Financial StatementsIntermediate

ROCE

Return on Capital Employed

Operating profit earned on all the capital a business uses, debt and equity together.

Detailed explanation

ROCE judges how efficiently a company turns its total capital into operating profit, independent of how it is financed.

Formula

ROCE = EBIT ÷ (Total assets − Current liabilities) × 100

Example

EBIT ₹80 cr ÷ capital employed ₹500 cr = 16%.

Why it matters

A ROCE consistently above the cost of capital suggests value creation.

Key points

  • Compare with cost of capital.
  • Useful for capital-heavy sectors.
  • Complements ROE.

Related terms

ROEEBITWACC

More in Financial Statements

Income StatementRevenueCost of Goods SoldGross MarginEBITDAEBIT

Educational content only. Definitions and examples are illustrative and are not investment, tax or legal advice.