How to interpret Return on Capital Employed (ROCE)?
A short thread with examples !
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1. We all know that Return on Capital Employed (ROCE) is the measure of a company's operating profit divided by its capital employed. It basically tells us how efficiently a company generates its operating profit through the capital it has infused in the business.
2. But it's very important to understand different drivers of Return on capital employed (ROCE). Return on capital employed (ROCE) is driven by two factors-EBIT or operating margin and capital employed turnover. We’ll see this using some examples.
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