Saturday 14 October 2017

Return on Capital Employed (ROCE)

Return on Capital Employed (ROCE)




The Return on Capital employed indicates the profitability of the company taking into consideration
the overall capital it employs.

Overall capital includes both equity and debt (both long term and short term).

ROCE = [Profit before Interest & Taxes / Overall Capital Employed]
Overall Capital Employed = Short term Debt + Long term Debt + Equity

From ARBL’s Annual Report we know:

Profit before Interest & Taxes = Rs.537.7 Crs

Overall Capital Employed:

Short term debt: Rs.8.3 Crs
Long term borrowing: Rs.75.9 Crs
Shareholders equity = Rs.1362 Crs
Overall capital employed: 8.3 + 75.9 + 1362 = 1446.2 Crs
ROCE = 537.7 / 1446.2 = 37.18%


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