# ROCE: Ratio, Interpretation, and Example.

. What is Return on Capital Employed (ROCE)? How do you interpret it? What is an example of how it is used?

What does negative ROCE mean? ROCE is a financial ratio that measures the profitability of a company. It is calculated by dividing the company's operating profit by its capital employed. A high ROCE means that the company is generating a lot of profit from its capital employed. A low ROCE means that the company is not generating enough profit from its capital employed. A negative ROCE means that the company is losing money.

### How do you interpret ROCE and ROE?

ROCE (return on capital employed) and ROE (return on equity) are two key financial ratios that measure a company's profitability and performance.

ROCE is a measure of a company's profitability that takes into account both its operating income and its capital employed. Capital employed includes both debt and equity. ROCE is calculated by dividing a company's operating income by its capital employed.

ROE is a measure of a company's profitability that takes into account only its equity. ROE is calculated by dividing a company's net income by its shareholder equity.

Both ROCE and ROE are important ratios to consider when assessing a company's profitability and performance. ROCE gives a more comprehensive view of profitability, as it takes into account a company's operating income and capital employed. ROE, on the other hand, focuses solely on a company's equity and provides a more targeted view of profitability.

What is a high current ratio? A high current ratio indicates that a company has a strong ability to pay its short-term obligations. A current ratio is calculated by dividing a company's current assets by its current liabilities. A ratio of 1.0 or higher is generally considered to be a strong current ratio.

#### Why is current ratio important?

The current ratio is one of the most important financial ratios. It is a measure of a company's ability to pay its short-term liabilities with its current assets. The higher the current ratio, the more able the company is to pay its short-term liabilities. The current ratio is also a good indicator of a company's financial health.

##### What is a good value of ROE and ROCE?

There is no one-size-fits-all answer to this question since the ideal values for ROE (return on equity) and ROCE (return on capital employed) vary depending on the specific industry and business context. However, as a general rule of thumb, a good ROE is typically considered to be around 10-15%, while a good ROCE is typically considered to be around 15-20%.