1. What is Return on Capital Employed (ROCE)?

ROCE is a financial ratio that measures a company's profitability and the efficiency with which its capital is employed. In the Australian context, it uses NOPAT (Net Operating Profit After Tax) to calculate the return.

2. How Does the Calculator Work?

The calculator uses the ROCE formula:

Where:

• \( NOPAT \) — Net Operating Profit After Tax (AUD)
• \( Capital\ Employed \) — Total capital invested in the business (AUD)

Explanation: The ratio shows how effectively a company generates profits from its capital. Higher values indicate better performance.

3. Importance of ROCE Calculation

Details: ROCE is crucial for assessing business efficiency, comparing performance across companies, and making investment decisions in the Australian market.

4. Using the Calculator

Tips: Enter NOPAT and Capital Employed in Australian dollars (AUD). Both values must be positive, with Capital Employed greater than zero.

5. Frequently Asked Questions (FAQ)

Q1: What is a good ROCE value in Australia?
A: Generally, ROCE above 15-20% is considered good, but this varies by industry. Compare with industry benchmarks.

Q2: How is NOPAT different from net profit?
A: NOPAT excludes financing costs and non-operating income/expenses, focusing purely on operating performance.

Q3: What's included in Capital Employed?
A: Typically includes equity plus non-current liabilities, or total assets minus current liabilities.

Q4: Why use ROCE instead of ROE?
A: ROCE considers all capital (both equity and debt), providing a more complete picture than ROE which only looks at equity.

Q5: How often should ROCE be calculated?
A: Typically calculated annually, but can be done quarterly for more frequent performance tracking.