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.