2006-12-29 07:55:42 · 3 answers · asked by Random111 1 in Business & Finance ➔ Other - Business & Finance
Shows company is more efficient + has higher margins. This indicates its position is protected.
2006-12-29 08:48:47 · answer #1 · answered by Anonymous · 0⤊ 0⤋
Quick answer. Shareholders employ directors. Directors need to keep shareholders happy if not they are out. Having a higher ROCE means that rate of return to shareholders is high. You give them lots of dividends and your job is safe. If your ROCE is low, without good reason, you had better start coming up with answers otherwise you might as well start looking for a new job
2006-12-29 17:03:57 · answer #2 · answered by Anonymous · 0⤊ 0⤋
When a company has high Return On Capital Employed, it is making more profit for each dollar tied up in the business.
If you earn 20 cents on every dollar invested in/tied up in equipment and short-term cash that's needed for materials and salaries and tools and buildings and things, then thats better than earning 10 cents on every dollar.
It affects the long term rate of growth. If you can re-invest that cash next year and get the same 20% return then the company can grow faster than a company that only earns 10% and can re-invest it to make 10% in subsequent years.
As an example, if a burger chain had 100 branches costing 1 million dollars each, earning 200,000 a year each, they would earn 20 million dollars and could build 20 new branches the next year.
2006-12-29 16:00:34 · answer #3 · answered by ricochet 5 · 1⤊ 0⤋