RETURN ON EQUITY

[millitread]

IS RETURN ON EQUITY THE SAME AS RETURN ON CAPITAL EMPLOYED

[SandyHood]

No<BR><BR>The return on capital employed measures the ability of the managers of the business to generate profits from the total capital invested.<BR><BR>So ROCE uses profit before any interest or tax has been taken off; and divides it by the total invested i.e. the shareholders funds (equity) AND any long term creditors (e.g. bonds issued or mortgages)<BR><BR>The return on equity is the return that shareholders make on their investment. <BR>It is the profit after interest and tax has been taken off; divided by the shareholders funds (equity) only<BR><BR>So these two different measures tend to be used by different stakeholders, for different reasons.<BR><BR>sandy.hood@chichester.ac.uk<BR><BR>Sandy

[millitread]

thanks sandy