Return on Capital Employed

What is Return on Capital Employed?

A profitability ratio expressing profit as a percentage of the capital employed in a business, where capital employed is owners' equity plus non-current liabilities. It measures how much profit each unit of long-term finance generates in a year, and it is therefore the ratio that answers whether the business is a worthwhile use of the money invested in it, independently of how large that business happens to be.

This definition is part of the Financial Information and Decisions chapter in Cambridge O Level Business Studies.

Concepts related to Return on Capital Employed

• Capital Employed
• profit margin
• Profitability