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ROCE is used to prove the value the business gains from its assets and liabilities. Companies create value whenever they are able to generate returns on capital above the weighted average cost of capital (WACC). [3] A business which owns much land will have a smaller ROCE compared to a business which owns little land but makes the same profit.
ROCE or RoCE may refer to: Return on capital employed, an accounting ratio used in finance; Return on common equity, a measure of the profitability of a business in ...
Graphical representation of DuPont analysis. DuPont analysis (also known as the DuPont identity, DuPont equation, DuPont framework, DuPont model, DuPont method or DuPont system) is a tool used in financial analysis, where return on equity (ROE) is separated into its component parts.
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ROIC = NOPAT / Average Invested Capital There are three main components of this measurement: [2] While ratios such as return on equity and return on assets use net income as the numerator, ROIC uses net operating income after tax (NOPAT), which means that after-tax expenses (income) from financing activities are added back to (deducted from) net income.
Cash return on capital invested [1] (CROCI) is an advanced measure of corporate profitability, originally developed by Deutsche Bank's equity research department in 1996 (it now sits within DWS Group).
If there are mandatory repayments of debt, then some analysts utilize levered free cash flow, which is the same formula above, but less interest and mandatory principal repayments. The unlevered cash flow (UFCF) is usually used as the industry norm, because it allows for easier comparison of different companies’ cash flows.
Return on tangible equity (ROTE) (also return on average tangible common shareholders' equity (ROTCE)) measures the rate of return on the tangible common equity.. ROTE is computed by dividing net earnings (or annualized net earnings for annualized ROTE) applicable to common shareholders by average monthly tangible common shareholders' equity. [1]