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 equity (ROE) which we’ve explained in a previous video. But the problem with ROE is that it doesn’t take a company’s debt into account.

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

See also:

•  What is return on equity?

Video tutorial - why profit margins matter

Why profit margins are really useful

In this video, Ed Bowsher explains how to calculate a company’s profit margin, why it is the best way to evaluate profitability, and how you can use it when analysing a company.

Video tutorial: why hedge funds can be good news

Why hedge funds can be good news

Hedge funds perform a valuable service by weeding out overvalued shares. In this video, Ed Bowsher explains some of the things they look for when they’re hunting for shares to short.

Video tutorial - what is the current ratio?

What is the ‘current ratio’?

In his latest video, Ed Bowsher looks at the current ratio, which can help you see whether a company has sufficient resources to pay its bills in the near future.

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