Return on capital employed:

Return on capital employed:

ROCE is the second type of ROI. It is the relationship between the profits and capital employed.

The term capital employed refers to long-term funds supplied by the lenders and owners of the firm.

There are 2 ways. First, non-current liabilities(long-term liabilities) plus owners’ equity.

Alternatively, its equivalent to net working capital plus fixed assets.

Second, it is equal to long-term funds minus investments made outside firm.

It is to estimate how efficient the long-term funds have been used?

If the ratio is higher, the more efficient is the use of capital employed.