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Return on Capital Employed – ROCE Calculator

Written by:
PK

Below is a Return on Capital Employed or ROCE calculator. Enter a business's Earnings Before Interest and Taxes (EBIT) and Capital Employed, and the tool will calculate its ROCE.

Return on Capital Employed Calculator

What is ROCE or Return on Capital Employed?

Return on Capital Employed, or ROCE, is an efficiency ratio that helps you determine a company's performance based on the amount of capital they employ to run the business. 

It starts with the company's earnings before it has to service any debt or pay taxes. Then, you divide by Capital Employed, the company's total assets net of any current liabilities. 

Return on Capital Employed Formula

The formula for Return on Capital Employed (ROCE) is:

Return\ on\ Capital\ Employed=\frac{EBIT}{Capital\ Employed}

Where:

  • EBIT – Earnings before the company pays taxes and interest.
  • Capital Employed – All assets listed on the balance sheet minus any current liabilities.

Using the ROCE Calculator

Return on Capital Employed is a similar measure to Return on Invested Capital, but ignores any long term debt to focus on the immediate operating needs of the business. However, unlike Return on Equity, it considers debt coming due in the next year.

Especially in trying times, ROCE is a great way to screen through industries which are historically heavy-debt users, like industrials and utilities. You can quickly see which companies are the best allocators before the effects of interest on earnings and longer-term debt on the balance sheet. It's also – like ROIC – a useful way to compare a company to itself in the past. As a bonus, it's easier to compute than the controversial Invested Capital.

Other Resources:

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