Return on capital employed

Return on capital employed (ROCE) expresses operating profit as a percentage of capital employed — equity plus long-term debt — measuring how efficiently a firm generates profit from its entire long-term financing base.

ByHoang TruongUpdated June 30, 2026

FrameworkRatio analysis

See it move

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A dial reads 12%, the return on capital employed. Operating profit of €90,000 is divided by capital employed of €750,000 — €600,000 in non-current assets plus €150,000 in net current assets. Comparing this 12% return against the firm's cost of capital shows whether value is being created or destroyed.

Where it fits

SubjectFinancial AccountingCoreTopicFinancial Statement Analysis & RatiosCore

The formula

LaTeX

\text{ROCE} = \frac{\text{Operating Profit}}{\text{Capital Employed}} \times 100

Variables

$O p er a t in g P r o f i t$: Profit before interest and tax — makes ROCE comparable across different financing structures (€)
$C a p i t a l E m pl oy e d$: Total assets minus current liabilities; equals shareholders' equity plus long-term debt (€)

Operating profit is profit before interest and tax (PBIT)