MANAGEMENT

Detailed explanation-1: -Return on capital employed (ROCE) and return on investment (ROI) are two profitability ratios that measure how well a company uses its capital. ROCE looks at earnings before interest and taxes (EBIT) compared to capital employed to determine how efficiently a firm uses capital to generate earnings.

Detailed explanation-2: -ROCE is based on capital employed, which is broader than invested capital on which ROIC is anchored. Therefore, the scope of ROCE is more extensive than ROIC, since the former considers the total capital employed, which is a total of debt and equity financing less short-term liabilities.

Detailed explanation-3: -Return on Investment (ROI) A calculation of the monetary value of an investment versus its cost. The ROI formula is: (profit minus cost) / cost. If you made $10, 000 from a $1, 000 effort, your return on investment (ROI) would be 0.9, or 90%.

Detailed explanation-4: -Capital employed is defined as the total amount of a firm’s assets minus its current liabilities. It is synonymous with the available capital from the net profits.

Detailed explanation-5: -Return on Capital Employed (ROCE), a profitability ratio, measures how efficiently a company is using its capital to generate profits.