Return of Capital Employed

A measure of the efficiency and profitability of capital investment (ie. funds provided by shareholders & lenders). Return on Capital Employed monitors the relationship between the capital (‘inputs’) used by the business and the earnings (‘outputs’) generated by the business. Return on Capital Employed is arguably one of the most important performance measures. The higher the result the greater the return to providers of capital. In the example below, for this period, the business has generated a Return on Capital Employed of -202.36%. This return is substantially less than the target of 12.5% – indicating the business is not utilizing capital effectively.