How this calculator works
ROCE uses earnings before interest and tax so financing costs do not distort the numerator. Choose either equivalent balance-sheet definition of capital employed. For an annual performance assessment, an average of opening and closing capital can be more representative; enter balance-sheet amounts reflecting your chosen basis. Negative or zero capital makes ordinary peer comparisons unreliable and is rejected.
Formula
Capital employed = assets - current liabilities = equity + non-current liabilities. ROCE = EBIT/capital employed. EBIT = ROCE x capital employed.
Worked example
Assets of $100,000 less $20,000 current liabilities give $80,000 capital. EBIT of $12,000 gives 15% ROCE. EBIT of -$4,000 on the same capital gives -5%.
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Frequently asked questions
Why exclude interest?
EBIT measures operating earnings before the cost of debt financing.
Is ROCE the same as ROIC?
No. ROIC usually uses after-tax operating profit and a separately defined invested-capital base.
Can ROCE be negative?
Yes, operating losses give a negative ROCE when capital employed is positive.