3.5.2 Rario Analysis Flashcards
What does ROCE stand for?
Return on Capital Employed
What is the equation for ROCE?
(Operating Profit) / (Total equity + Non-current Liabilities) * 100
What is ROCE?
A meausure of how effieicently a business is using its capital employed to generate profits
What is Gearing?
Measure what proportions of a business’ capital is funded through long term loans
What is the equation for Gearing?
(Non current Liabilities / Total equity + Non Current liabilities) * 100
What are some reasons for gearing?
Risk of rising intrest rates
Set investment criteria
Strategic decisions
What are some reasons for return of captial employed?
Financial Rewards
Efficiency trainging
Future investments
Caoacity utilisation targets
What is a benfit of assessing performance?
Structure for comparison can be made
Aids decision making