RETURN ON CAPITAL EMPLOYED - Accounts and Finance for Managers

The ratio illustrates that how much return is earned in the form of Net profit after taxes out of the total capital employed. The capital employed is nothing but the combination of both non current liabilities and owners’ equity. The ratio expresses the relationship in between the total earnings after taxation and the total volume of capital employed.

Return on total capital employed= (Net profit after taxes × 100/ Total capital employed)

Standard norm of the ratio

Higher the ratio is better the utilization of the long term funds raised under the capital structure means that greater profits are earned out of the total capital employed.

Activity turnover ratio: It highlights the relationship in between the sales and various assets. The ratio indicates that the rate of speed which is taken by the firm for converting the assets into sales.


All rights reserved © 2018 Wisdom IT Services India Pvt. Ltd DMCA.com Protection Status

Accounts and Finance for Managers Topics