Return on Capital Employed is used to compare the efficiency of capital usage of companies within the same industry. The below given is the ROCE formula to calculate the Return on Capital Employed. ROCE ratio formula shows that dividing net operating profit or EBIT by the employed capital will give the result. Return on Capital Employed formula is a most commonly used formula by the financial analysts as they consider this return as an important comprehensive profitability indicator.
A high return indicates that the company is gaining larger profits and can be invested back into the company. ROCE formula can be used to measure the management's ability to generate earnings from a company's total pool of capital.
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