What are the Key Problems With Return On Capital Employed Ratio Analysis of a Company or an Industry?
Three possible key problems with the Return On Capital Employed (ROCE) percentage are: • Investors & industry place too much emphasis on the ROCE ratio without carrying out analysis of the supporting key profitability ratios. • Investors & industry often do not carry out deep fact based comparative analysis with similar companies (eg often different accounting policies are ignored). • Investors & industry often find it difficult to get industry benchmark ROCE ratios (especially true for unquoted stock).
