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Chapter 21

1.7 Return on capital employed (ROCE): calculation

Profit from operations

————————— × 100%
Capital employed

1.8 Return on capital employed: reasons for movement

 efficiency: movement in asset turnover

 profitability: movement in operating profit margin

 combination of both

1.9 Profitability ratio relationship

Operating profit margin × Asset turnover = ROCE

Profitability × Efficiency = Return

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