Compare between Return on invested capital (ROIC) and Return on capital employed (ROCE).

Question

Compare between Return on invested capital (ROIC) and Return on capital employed (ROCE).

Banking & FinanceManagementCompanies/Organisations

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The major differences between ROIC and ROCE are as follows −

ROIC

• ROIC refers to Return on invested capital.

• It aims to find the return relative to capital which is invested in business.

• It evaluates profitability by considers only capital invested in the business.

• ROIC = Net operating profit/invested capital.

• Company said to be profitable, if ROIC is greater than zero.

• Measures after tax.

• It is more important for an investor.

ROCE

• ROCE refers to Return on capital Employed.

• Its main aim is to find return relative to total capital employed.

• It had very broad scope.

• ROCE = net operating profit/capital employed.

• Company said to be profitable, if ROCE greater than cost of capital.

• Measures before tax.

• It is important from company.

Mandalika

Published on 27-Jul-2020 11:48:36

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