performance measurment

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June 7, 2017 at 7:46 am #391203
adarsh1997
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Hi John!

I am having some problem to understand how by reducing capital employed through the repayment of long term debt could result into an increase on ROCE. Could you please explain?

Thanks.
June 7, 2017 at 2:41 pm #391343
John Moffat
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The return on capital employed is profit before interest and tax divided by the long term capital (debt + equity).

If the denominator falls (because debt has been repaid) then the ROCE will increase. Make up some numbers and see what happens then you reduce debt.
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