Return on Capital Employed (ROCE)

[@tutor2u-official]

Find out more on this topic from the tutor2u website www.tutor2u.net/business/reference/return-on-capital-employed

[@محمدصبرينوار]

Thanks.....Allah blesses you

[@JitendraYadav-jv3yx]

Very simply explained, thanks !!

[@tutor2u-official]

Glad it was helpful!

[@Into.Studio]

This was so well presented, and made very interesting, thank you!

[@tutor2u-official]

Glad you enjoyed it!

[@louisrobertson4489]

best place to revise before a levels !

[@IgorJadczak]

Good luck bro

[@tutor2u-official]

Thanks - good luck!

[@max-gg9qk]

p3 sooooon

[@mikev324]

I read that ROCE should be higher than cost of capital. Which formula do you use for cost of capital to compare it to ROCE ratio?

[@vivekr2056]

thank you so much it is very useful to me

[@karanashara6663]

If we want to calculate ROCE for balance sheet for more than one term then capital employees should be averaged right??

[@eshalasif4223]

Hey do we include current part of non current liabilities in capital calculation?

[@pavsofficial4284]

Thanks Dr. 🙌

[@tutor2u-official]

Any time

[@marie-franceniamke938]

Useful ! Thanks !

[@kamauwilliamk]

Helpful

[@dandreiagonzalez5921]

Thank you Thank you Thank you

[@casey9559]

How do I work out capital employed with opening capital, profit for the year and less drawings?

[@alisonnorcross951]

How do this calc on property investment?

[@rg5753]

Amazing

[@tutor2u-official]

Thank you! Cheers!

[@christopherellis2663]

Wonder if this can be applied to the personal balance sheet? How is my capital employed serving me?

[@bighands69]

Yes it can and you can have a more accurate figure as you will know exactly what assets are best producing. When you are analysing a company the balance sheets will not signify what assets produce what.

[@esportsism5822]

Shouldn't Company Y ROCE be 18.8% because it is rounded from 18.75%?

[@allenajith2585]

Usually when the value is in 5, it can either be rounded up or down. Im assuming he rounded it down to 18.7 because I havent watched the video completely yet. I also realize this comment is over 3 years old lol

[@charlottesteele428]

You are more specific with numbers, you wouldn’t round them up

[@Ezinma88]

Why do you have to use just non-current liabilities? Why not current liabilities too?

[@easylogic543]

Current liabilities are not used to fund capital expenditure, they are needed for maintaining the working capital (Current Assets- Current Liabilities= Working Cap). Capital structure includes capital from either debt or equity.

[@ReceiverJake]

What is the difference between this ratio and the return on Invested capital (ROIC)? are they synonyms?

[@tutor2u-official]

Essentially the same

[@timur_kz7443]

Jacob Penta, Roce is essentially Roic before tax, useful when comparing peer companies in diff countries with diff tax rate systems. Roic is after tax

[@casey9559]

@@tutor2u-official how do I work out capital employed with opening capital, profit for the year and less drawings? Confused

[@steve917]

It does not factor in costs of capital. Thus, the ratio presents a historical perspective. Risk, investment horizon and tolerance of risk are important in investment decisions. Just my 1 cent.

[@hamda2184]

😭😭😭😭 I am gonna fail

[@jackalexander8842]

I'm currently a 2nd year Accounting student (BA Hons) and we are taught to calculate ROCE by dividing Profit before interest & tax by capital employed (Total assets less current liabilities) what is the difference?

[@easylogic543]

Hi Jack, Operating profit is the profit which you earn just after deducting all the operating costs from gross profit. Remember, operating cost excludes interest income, tax and interest charges. Hence, Operating profit = Profit before interest and tax On the other hand, capital employed focuses on the total capital from both the sources debt and equity. In essence, it considers both sources in the capital structure. Let me equate this using the accounting equation. Total Asset = Equity + NCL + CL Total Asset - CL = Equity + NCL --------> This is capital employed

[@kieranstanden3213]

However, Profit before tax also includes all finance incomes and deducts the the finance expenses? Operating profit just deducts distribution costs/Admin costs from the Gross Figure?

[@easylogic543]

Yes correct

[@dodgingdurangos924]

Easy Logic I guess if you have problems remembering why certain calculations add up to the same outcome, it's helpful to go back to basics: Assets = Liabilities + Shareholders' Equity. This balance sheet equation must *balance*. Then do a little math and drill down from there. Would the Capital Employed calculation vary from company to company due to each firm's Working Capital policy, i.e. how aggressively current assets are being financed?

[@mxolisisilinda8420]

Your respond hv actually opened my mind. Thank you

[@rainniwkw]

❤️❤️❤️❤️❤️❤️

[@harryochmann8868]

what the fuck is this?

[@sudhindrakumar8846]

if comany is debt free..then will roe and roce will be same?