What is ROCE (Return on Capital Employed)?

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pohnpei397 eNotes educator| Certified Educator

Return on Capital Employed (ROCE) is a ratio that is used to determine how efficiently a business is using its resources.  It is therefore much more informative about a firm’s strength than simply gross profit margins would be.  ROCE tells us how much profit a company is making compared to how much capital it is using to make that profit.  The higher the ratio, the better the company is doing.

This ratio is found by dividing operating profit by capital employed.  Operating profit is defined as profit before interest and taxes are removed.  Capital employed can be defined as total assets minus current liabilities.