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More Information About Return On Capital Employed (ROCEThe ratio for ROCE, the Return On Capital Employed, as discussed on the previous page , can be further broken into two strands. Trading profit / Sales x Sales / Capital Employed = Trading Profit / Capital Employed where sales = sales revenue or turnover This means that: Trading Profit / Sales = Profit Margin The second of these strands is: Sales / Capital Employed This will express the volume of sales being generated by the business for the amount of capital being employed. It is therefore expressed as a multiple. As you calculate this figure over a number of years, trends may emerge. For example, the ratio may be a rising number which might indicate improved performance. However, it may also be showing static sales being generated from a reducing amount of capital. This may be because of depreciation and thus is not improved performace at all. Other pages of potential interest are listed here:
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