1. What is ROCE?

ROCE (Return on Capital Employed) is a financial ratio that measures a company's profitability and the efficiency with which its capital is employed. It shows how well a company generates profits from its capital.

2. How Does the Calculator Work?

The calculator uses the ROCE formula:

Where:

• \( Operating\ Profit \) — Earnings before interest and taxes (EBIT)
• \( Equity \) — Shareholders' equity
• \( Long\text{-}Term\ Debt \) — Non-current liabilities

Explanation: ROCE compares operating profit to the total capital employed (equity plus long-term debt) to show how efficiently capital is being used to generate profits.

3. Importance of ROCE Calculation

Details: ROCE is a key metric for investors and analysts to assess a company's profitability and capital efficiency. It's particularly useful for comparing companies in capital-intensive industries.

4. Using the Calculator

Tips: Enter operating profit, equity, and long-term debt in USD. All values must be non-negative. The calculator will compute the ROCE ratio.

5. Frequently Asked Questions (FAQ)

Q1: What is a good ROCE value?
A: Generally, a ROCE above 15% is considered good, but this varies by industry. Compare to industry averages for meaningful analysis.

Q2: How does ROCE differ from ROE?
A: ROCE considers both equity and long-term debt, while ROE (Return on Equity) only considers equity. ROCE gives a broader view of capital efficiency.

Q3: Can ROCE be negative?
A: Yes, if operating profit is negative, ROCE will be negative, indicating the company is losing money on its capital employed.

Q4: What are limitations of ROCE?
A: ROCE can be manipulated through accounting practices and doesn't account for short-term fluctuations in capital or profits.

Q5: How often should ROCE be calculated?
A: Typically calculated quarterly or annually, along with other financial metrics, to track performance over time.