Return on Capital Employed

Return on Capital Employed Ratio

                = Net Profit before tax + Interest on Debentures/Loan x 100
                                      Capital Employed

This ratio is an indication of the earning power of the business. It indicates whether there is a proper and balanced utilisation of resources of the enterprise. It is a measure of effective management of the enterprise although shareholders are more interested in the share of the total earnings after payment of interest. It also proides an indication of the economic productivity of capital.

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