Return on Capital Employed (ROCE) Calculator

How it is calculated

The tool calculates Capital employed = Total assets − Current liabilities and ROCE = EBIT / Capital employed × 100. EBIT is earnings before interest and tax for the year, usually from the income statement, while total assets and current liabilities come from the balance sheet, all in the same currency. EBIT may be negative, which gives a negative ROCE. Assets and current liabilities cannot be negative, and capital employed must be above zero, so if current liabilities are equal to or larger than total assets there is no result. The ratio uses the closing balance sheet figures you enter, not an average of opening and closing capital. The result is shown as a percentage with two decimals.

Common mistakes

• Using net profit instead of EBIT. ROCE is built on operating profit before interest and tax, so net income would understate it for a company with debt and tax.
• Entering total liabilities rather than current liabilities. Only the short-term part is subtracted, because long-term debt is part of the capital employed.
• Subtracting from equity instead of total assets. Capital employed is total assets minus current liabilities, not equity alone.
• Comparing ROCE across industries without care. Banks, utilities and software firms hold capital very differently, so compare with peers in the same sector.
• Mixing periods, such as a full-year EBIT with a balance sheet from a different date, or a quarter's EBIT without annualising it.