Return on capital employed

Similar to ROIC, except that long-term debt is taken into account as part of total capital employed.
Thus the conventional formula is

(After tax operating income) / (total assets)

where ‘total assets’ is defined as (equity – short-term liabilities + longterm debt). It therefore expresses the return a company is getting on the total capital employed in the business. Since the measure includes fixed assets, which are depreciated, a company’s ROCE will tend to rise over time, even when there is no change in cash-flow generation, all other things being equal.

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