Extracting key numbers from financial statements lets one calculate performance metrics. There are seven. They make clear whether or not a business has been historically good.
The first performance metric is return on capital employed, or ROCE. ROCE is a ratio. It’s expressed as a percentage. The numerator is operating income. The denominator is capital employed.
The purpose of ROCE is to show how much money a business made relative to the amount of capital it needed.
The numerator, operating income, describes a period of time. This is because it comes from the income statement, which is like a movie.
But the denominator, ...