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ROI being ROCE

This topic has 1 reply, 2 voices, and was last updated 1 year ago by John Moffat.

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October 3, 2021 at 2:55 pm #636910
Imran.Sajjad
Member
- Topics: 24
- Replies: 7
Why don’t we actually call ROI ratio to ROCE because they are effectively using the same logic!
I watched your lecture where u said that “division doesn’t have capital employed” in their hands rather it is centrally managed by Head Office?
Since it is only one company & any capital employed will be injected by the Head Office but it is the manager’s job to invest the capital in the right way which would be profitable for the company as a whole.
correct?
October 3, 2021 at 4:05 pm #636921
John Moffat
Keymaster
- Topics: 56
- Replies: 51585
Although the two are the same, the ROCE is calculated for the company as a whole whereas the ROI is calculated just for a division (or just for an individual investment).
Your last paragraph is correct (assuming that it is an investment division).
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