3.5.2 Rario Analysis

Question 1

What does ROCE stand for?

Answer 1

Return on Capital Employed

Question 2

What is the equation for ROCE?

Answer 2

(Operating Profit) / (Total equity + Non-current Liabilities) * 100

Question 3

What is ROCE?

Answer 3

A meausure of how effieicently a business is using its capital employed to generate profits

Question 4

What is Gearing?

Answer 4

Measure what proportions of a business’ capital is funded through long term loans

Question 5

What is the equation for Gearing?

Answer 5

(Non current Liabilities / Total equity + Non Current liabilities) * 100

Question 6

What are some reasons for gearing?

Answer 6

Risk of rising intrest rates
Set investment criteria
Strategic decisions

Question 7

What are some reasons for return of captial employed?

Answer 7

Financial Rewards
Efficiency trainging
Future investments
Caoacity utilisation targets

Question 8

What is a benfit of assessing performance?

Answer 8

Structure for comparison can be made

Aids decision making