ROCE stands for Return on Capital Employed and is a measure of the return a company generates from the capital invested in the business. The measure basically compares earnings with the capital employed to provide an insight into how well a business has used its capital investments to generate income.
ROCE uses the reported (period end) capital numbers. A variation of this metric is Return on Average Capital Employed (ROACE) which uses the average of the opening and closing capital for the period.
ROCE = EBIT / Total capital employed
This indicator is included in the book: Key Performance Indicators - the 75+ measures every manager needs to know, which contains an in-depth description of this KPI, as well as practical advice on data collection, calculations, target setting, and actual usage.
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