Question

Return on Capital Employed or Investment (ROCE or ROI) can be calculated as ______?

Options

• Profit before Interest and Tax/Capital Employed × 100

• Profit after Interest and Tax/Capital Employed × 100

• Net Sales/Net Fixed Assets

• None of the above

Answer 1

Return on Capital Employed or Investment (ROCE or ROI) can be calculated as Profit before Interest and Tax/Capital Employed × 100.

Explanation:

It describes the overall use of funds by a corporate enterprise. Capital utilized refers to the long-term finances used in the business, which include shareholder cash, debentures, and long-term loans. Capital employed can also be defined as the sum of non-fictitious assets and current liabilities. For the purposes of this ratio, Profit refers to Profit before Interest and Tax (PBIT). As a result, it is calculated as follows:

Return on Investment (or Capital Employed) = Profit before Interest and Tax/Capital Employed × 100.