How do you calculate ROC or Return on Capital when you look at a balance sheet or earnings report?

Question

In the Little Book That Beat the Market, Joel Greenblatt mentions ROC, Return on Capital as a criteria for choosing stocks to buy. What is your take on how to second check the balance sheet of a particular company to see if you want to invest in that company?

Answer 1

Return on Capital ROC is nothing other than Return on Equity. Capital is used for Partnerships and Equity for Corporations. So it is slightly confusing how can a Partnership trade in Stock Exchanges or have stocks in the firsrt place. Leaving aside the confusion, since we are dealing with stocks Return on equity is calculated from Earnings report or Income statement and Balance Sheet of a corporation that has shares traded in the Stock Exchange. Take out the Net Income from Income Statement and Stockholders Equity from the Balance sheet divide the former by the latter you will get Return on Equity. I was about to send you some OTC stock recommendation but was lazy for a few days. Luckly I didn't have to do it see the Market crashed.

Answer 2

Mathew, a partnership can have stock by operating as a Limited Liability Company or Corporation. A limited liability company with multiple members is typically treated as a partnership for tax purposes, thereby avoiding double taxation. Choosing to operate as member management creates a flat member or partnership structure. Examples on the NYSE: Buckeye Partners (BPL), Enbridge Partners (EEP), Enterprise Partners (EPD), etc.

Answer 3

Mathew, a partnership could have inventory by working as a constrained criminal accountability organisation or organisation. A constrained criminal accountability organisation with distinctive contributors is in many circumstances dealt with as a partnership for tax applications, thereby warding off double taxation. picking to function as member administration creates a flat member or partnership shape. Examples on the NYSE: Buckeye companions (BPL), Enbridge companions (EEP), organisation companions (EPD), etc.