ROCE Calculator (Return on Capital Employed)
Calculate return on capital employed (ROCE = EBIT ÷ (total assets − current liabilities)), capital employed and the spread over your cost of capital to see whether a business creates value.
How it works
Capital employed = total assets − current liabilities (= equity + non-current liabilities) · ROCE = EBIT ÷ capital employed × 100 · spread = ROCE − WACC
ROCE measures how much operating profit a company squeezes out of all the long-term capital it uses, whether funded by shareholders or lenders. Because EBIT is before interest and tax, it compares businesses with different debt levels and tax rates, which makes it a favourite for capital-intensive sectors such as utilities, telecoms and manufacturing. A ROCE that stays above the weighted average cost of capital means the company creates value; one below it destroys value even if accounting profit is positive. Many analysts use average capital employed for the year, and some remove excess cash.
Worked example
A company with EBIT of 1,200,000, total assets of 10,000,000 and current liabilities of 2,500,000 has capital employed of 7,500,000. ROCE = 1,200,000 ÷ 7,500,000 = 16.00%, so every 100 of capital earns 16 of operating profit. Against a 9% cost of capital that is a spread of +7.00 percentage points — value created.
Sources: Investopedia — Return on Capital Employed (ROCE) · Corporate Finance Institute — Return on Capital Employed
Frequently asked questions
What is a good ROCE?
Above the company’s cost of capital, and ideally stable or rising. Many investors look for ROCE consistently above 15%–20%, but compare within the industry — asset-heavy sectors naturally earn less.
What is the difference between ROCE and ROE?
ROE divides net profit by equity only, so debt can inflate it. ROCE uses pre-interest profit and all long-term capital, so it shows operating efficiency regardless of how the business is financed.
How is ROCE different from ROIC?
ROIC usually uses after-tax operating profit (NOPAT) and invested capital adjusted for cash and non-operating items. ROCE is the simpler pre-tax version based on the balance sheet.
Should I use year-end or average capital employed?
Average capital employed (start plus end of year ÷ 2) is more accurate when the balance sheet changed a lot during the year; year-end is the quick, common shortcut.
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Educational estimate, not accounting or investment advice. Analysts and auditors adjust these figures with their own definitions — use the exact definitions of your reporting framework or loan agreement.