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Definition – What is Return on Capital Employed?
Return on Capital Employed is a ratio of EBIT to Capital Employed. It is listed as a percentage.
Formula – How to calculate Return on Capital Employed
Return on Capital Employed = (Earnings before Interest and Taxes / Capital Employed) x 100%
Example
A company has EBIT of $5,000 and capital employed of $8,000.
Return on Capital Employed = ($5,000 / $8,000) x 100% = 0.625 x 100% = 62.5%
Therefore, this company’s return on capital employed is 62.5%.
Sources and more resources
- Accounting Tools – Return on capital employed – A short entry on how to calculate ROCE.
- Wikipedia – Return on capital employed – Wikipedia’s entry on ROCE. Includes the formula to calculate it.
- Investopedia – Return on capital employed – A break down of return on capital employed.