Return on capital employed
Also called: ROCE, return on invested capital, ROIC
Operating profit (EBIT) divided by the capital provided by shareholders and lenders together, a measure of business quality little affected by debt.
Because it uses profit before interest and capital from both sources, ROCE measures the business rather than how it is financed. A business creates value when its ROCE is above its cost of capital. Analysts often exclude surplus cash to see the return on the operating business.
Example
EBIT of ₹150 crore on equity of ₹600 crore plus borrowings of ₹400 crore is a ROCE of 15%.
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