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I’m trying to calculate ROCE with the formula of net profit/equity+Long term borrowings, however, I am not getting the right answer.
For 2016 I have done 15/(198+110)*100= 4.87% but the expected ROCE for 2016 is 6.8%.
Help would be appreciated, thanks in advance.
ROCE shows how productively (efficiently and effectively) a business has deployed its available resources, irrespective of how those resources have been financed. Thus the numerator is PBIT not net profit (i.e. after interest).
(46-25)/(198+110) x 100% = 6.8%Note when calculating ratios etc, 1 d.p. is generally sufficient.
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