ROCE is the most important ratio of all. It is the percentage of return on total capital employed in the business. The term total capital employed refers to long term funds supplied or invested by the creditors and owners of the company. Consequently, capital employed is the total of non-current liabilities (long term liabilities) and owner's equity. In short, this ratio tells the owner whether or not all the efforts put into the business has been worthwhile. The ROCE is calculated as follows:

Generally, average of opening and closing capital employed is considered for computing this ratio in which case it is also referred to as Return on Average Capital Employed. The profitability of the firm related to the sources of long-term funds can be judged from this ratio. One must compare this ratio with the ratio of similar firms, with the industry average and over a period of time to get meaningful insight into how efficiently the long term funds of owners and creditors are being used. The higher the ratio, the more efficient is the use of capital employed. The ratio must always be higher than the firm's cost of borrowings to be accretive to the shareholders.

One of the drawbacks of ROCE is that it is computed on the book values as reflected in the financial statements. Over time, the book value of assets reduces boosting the ROCE ratio. This may not be correlated with the cash flows generated from the company and may be misleading.

We have the best tutors in accounts in the industry. Our tutors can break down a complex Return on Capital Employed Ratio problem into its sub parts and explain to you in detail how each step is performed. This approach of breaking down a problem has been appreciated by majority of our students for learning Return on Capital Employed Ratio concepts. You will get one-to-one personalized attention through our online tutoring which will make learning fun and easy. Our tutors are highly qualified and hold advanced degrees. Please do send us a request for Return on Capital Employed Ratio tutoring and experience the quality yourself.

If you are stuck with a Return on Capital Employed Ratio Homework problem and need help, we have excellent tutors who can provide you with Homework Help. Our tutors who provide Return on Capital Employed Ratio help are highly qualified. Our tutors have many years of industry experience and have had years of experience providing Return on Capital Employed Ratio Homework Help. Please do send us the Return on Capital Employed Ratio problems on which you need Help and we will forward then to our tutors for review.