# Return on Capital Employed Calculator

Return on Capital Employed (ROCE) (also known as return on invested capital), is a profitability ratio in finance. It measures the return that an investment generates for capital contributors, i.e. bondholders and stockholders. It indicates how effective a company is at turning capital into profits.

ROCE is calculated by dividing a company’s earnings before interest and tax (EBIT) by its capital employed. In a ROCE calculation, capital employed means the total assets of the company with all liabilities removed.

`Return on Capital Employed = Operating earnings / Capital employed`

The ratio gives you the profit generated by each dollar (or other units of currency) employed.

## ROCE example

Suppose ABC Company has:

• Operating Earnings = \$300,000
• Assets = 200,000
• Liabilities = 50,000
• ROAC = 300,000 / (200,000 – 150,000) = 2

For every \$1 invested in capital employed, ABC Company earns \$2.

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