ROACE - Return on Average Capital Employed

 

What is ROACE ratio ? 

 

The ROACE, Return On Average Capital Employed (R.O.A.C.E.) is an indicator whose value in percentage terms express the overall average return of capital employed in the company's activity (fixed investments and working capital).

 

 

 

AVERAGE CAPITAL EMPLOYED =  [(FIXED INVESTMENTS - WORKING CAPITAL "N-1") + (FIXED INVESTMENTS - WORKING CAPITAL "N")] /2

 

It is an additional means to reveal the degree of efficiency in the use of capital employed in the company by the management in order to generate income. It is also useful in comparability analysis and in transfer pricing analysis. 

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