Compare between Return on invested capital (ROIC) and Return on capital employed (ROCE).

Banking & FinanceManagementCompanies/Organisations

The major differences between ROIC and ROCE are as follows −

ROIC

  • ROIC refers to Return on invested capital.

  • It aims to find the return relative to capital which is invested in business.

  • It evaluates profitability by considers only capital invested in the business.

  • ROIC = Net operating profit/invested capital.

  • Company said to be profitable, if ROIC is greater than zero.

  • Measures after tax.

  • It is more important for an investor.

ROCE

  • ROCE refers to Return on capital Employed.

  • Its main aim is to find return relative to total capital employed.

  • It had very broad scope.

  • ROCE = net operating profit/capital employed.

  • Company said to be profitable, if ROCE greater than cost of capital.

  • Measures before tax.

  • It is important from company.

raja
Published on 27-Jul-2020 11:48:36
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