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Return on capital employed (ROCE)
Strategic perspective
Financial perspective
Key performance question this indicator helps to answer
How well are we generating earnings from our capital investments?
Why is this indicator important?
Clearly, the prime objective of making an investment in a business is to obtain a satisfactory return on capital invested. One of the most popular metrics for assessing the success of a business in realising this objective is return on capital employed (ROCE).
The main elements of ROCE are operating profit and capital employed. ROCE compares earnings with the capital employed in the company. There are a number of ways that we can reach the earnings (or operating profit) ratio, but a common approach is to ...
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