What is return on capital employed?

It’s always important to consider what kind of return a company is generating from its assets. One way to do this is to look at return on capital employed (ROCE). Ed Bowsher explains what ROCE is, how to calculate it, and why it’s useful.

Its always important to consider what kind of return a company is generating from its assets.One way to do this is to look at return on equity (ROE) which weve explained in a previous video. But the problem with ROE is that it doesnt take a companys debt into account.

Another metric called return on capital employed (ROCE) does take debt into account, so its probably a more useful metric for precisely that reason.In this video, we explain how to calculate ROCE and why its useful.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

See also:

What is return on equity?

Advertisement

Most Popular

Visit/economy/600632/money-minute-friday-17-january-uk-weakness-likely-to-continue
Economy

Money Minute Friday 17 January: UK weakness likely to continue

Today's Money Minute previews UK retail sales figures the UK, inflation data from Europe and industrial production from the US.
17 Jan 2020
Visit/520525/currency-corner-how-high-can-the-pound-go-against-the-euro-in-2020
Currencies

Currency Corner: how high can the pound go against the euro in 2020?

In the month in which we should finally leave the European Union, Dominic Frisby takes a look at the pound vs the euro and asks just how high sterling…
13 Jan 2020
Visit/investments/property/house-prices/600638/uk-house-prices-may-be-heading-for-a-boris-bounce
House prices

UK house prices may be heading for a Boris bounce

The latest survey of estate agents and surveyors from the Royal Institution of Chartered Surveyors is "unambiguously positive" – suggesting house pric…
16 Jan 2020
Visit/investments/stocks-and-shares/share-tips/600636/class-acts-going-cheap-buy-into-europes-best
Share tips

Class acts going cheap: buy into Europe’s best bargains

Value investing appears to be making a comeback, while shares on this side of the Atlantic are more appealing on metrics such as price/earnings ratios…
16 Jan 2020