Return on Capital Employed

= Earnings before interest (EBIT) and tax/Capital Employed

Understanding Finance

Measures profits generated as a proportion of the capital base (debt + equity). We as investors would like to deploy the minimum proportion of our equity to any business for the maximum possible return (profit). Investing in a business with a high and sustainable ROCE often gives us the best chance to do that. We use EBIT as it allows comparison of businesses with differing levels of debt and in different tax jurisdictions.

Understanding Finance

Helping clients understand what we do is key to building relationships. To explain some of the industry jargon that creeps into our world, we’ve pulled together a section of our site to help.


Related articles
Understanding Finance

Conceptually we have a reasonable understanding of inflation. As an economic term, inflation represents the general price rise of goods and services over a predetermined time.

Understanding Finance

Usually, your bank would pay interest on your savings accounts. Negative interest rates turn this around and mean customers have to pay banks to hold their savings.

Understanding Finance

You probably sort of know how index linked gilts, or “linkers,” work. The redemption value is linked to the change in the retail price index, or RPI, that takes place over the life of the gilt.