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Return On Capital Employed
Return on capital employed is an accounting ratio used in finance, valuation, and accounting. It is a useful measure for comparing the relative profitability of companies after taking into account the amount of capital used.Fernandes, Nuno. Finance for Executives: A Practical Guide for Managers. NPV Publishing, 2014, Chapter 3. The formula : (Expressed as a %) It is similar to return on assets (ROA), but takes into account sources of financing. Capital employed In the denominator we have net assets or capital employed instead of total assets (which is the case of Return on Assets). Capital Employed has many definitions. In general it is the capital investment necessary for a business to function. It is commonly represented as total assets less current liabilities (or fixed assets plus working capital requirement). ROCE uses the reported (period end) capital numbers; if one instead uses the average of the opening and closing capital for the period, one obtains return on aver ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Profit (accounting)
Profit, in accounting, is an income distributed to the ownership , owner in a Profit (economics) , profitable market production process (business). Profit is a measure of profitability which is the owner's major interest in the income-formation process of market production. There are several profit measures in common use. Income formation in market production is always a balance between income generation and income distribution. The income generated is always distributed to the Stakeholder (corporate), stakeholders of production as economic value within the review period. The profit is the share of income formation the owner is able to keep to themselves in the income distribution process. Profit is one of the major sources of economics , economic well-being because it means incomes and opportunities to develop production. The words "income", "profit" and "earnings" are synonyms in this context. Other terms See also * Gross income * Net profit * Profitability index * Rate ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Financial Capital
Financial capital (also simply known as capital or equity in finance, accounting and economics) is any Economic resources, economic resource measured in terms of money used by entrepreneurs and businesses to buy what they need to make their products or to provide their services to the sector of the economy upon which their operation is based (e.g. retail, corporate, investment banking). In other words, financial capital is internal retained earnings generated by the entity or funds provided by lenders (and Investor, investors) to businesses in order to purchase real capital equipment or services for producing new Goods and services, goods or services. In contrast, real capital comprises physical goods that assist in the production of other goods and services (e.g. shovels for gravediggers, sewing machines for tailors, or machinery and tooling for factories). IFRS concepts of capital maintenance ''Financial capital'' generally refers to saved-up financial Wealth (economics), we ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Return On Assets
The return on assets (ROA) shows the percentage of how profitable a company's assets are in generating revenue. ROA can be computed as below: :\mathrm = \frac The phrase return on average assets (ROAA) is also used, to emphasize that average assets are used in the above formula. This number tells you what the company can do with what it has, ''i.e.'' how many dollars of earnings they derive from each dollar of assets they control. It's a useful number for comparing competing companies in the same industry. The number will vary widely across different industries. Return on assets gives an indication of the capital intensity of the company, which will depend on the industry; companies that require large initial investments will generally have lower return on assets. ROAs over 5% are generally considered good. Usage Return on assets is one of the elements used in financial analysis using the Du Pont Identity. See also *Return on equity (ROE) *List of business and finance abbre ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Asset
In financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value. Assets represent value of ownership that can be converted into cash (although cash itself is also considered an asset). The balance sheet of a firm records the monetaryThere are different methods of assessing the monetary value of the assets recorded on the Balance Sheet. In some cases, the ''Historical Cost'' is used; such that the value of the asset when it was bought in the past is used as the monetary value. In other instances, the present fair market value of the asset is used to determine the value shown on the balance sheet. value of the assets owned by that firm. It covers money and other valuables belonging to an individual or to a business. ''Total assets'' can also be called the ''balance sheet total''. Assets can be grouped into two major classes: Tangible property, tangib ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Current Liabilities
Current liabilities in accounting refer to the liabilities of a business that are expected to be settled in cash within one fiscal year or the firm's operating cycle, whichever is longer.Drake, P. P., ''Financial ratio analysis'', p. 3, published on 15 December 2012. These liabilities are typically settled using current assets or by incurring new current liabilities. Key examples of current liabilities include accounts payable, which are generally due within 30 to 60 days, though in some cases payments may be delayed. Current liabilities also include the portion of long-term loans or other debt obligations that are due within the current fiscal year. The proper classification of liabilities is essential for providing accurate financial information to investors and stakeholders. The classification of liabilities also plays a role in determining financial ratios, such as the current ratio—calculated as current assets divided by current liabilities. A higher current ratio ind ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Fixed Assets
Fixed assets (also known as long-lived assets or property, plant and equipment; PP&E) is a term used in accounting for assets and property that may not easily be converted into cash. They are contrasted with current assets, such as cash, bank accounts, and short-term debts receivable. In most cases, only tangible assets are referred to as fixed. While IAS 16 (International Accounting Standard) does not define the term ''fixed asset'', it is often colloquially considered a synonym for property, plant and equipment. According to IAS 16.6, property, plant and equipment are tangible items that: (a) are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes and (b) are expected to be used during more than one period. Fixed assets are of two types: * those which are purchased with legal right of ownership (in the case of property, known as ''freehold assets''), and * those for which the owner has temporary ownership rig ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Working Capital
Working capital (WC) is a financial metric which represents operating liquidity available to a business, organisation, or other entity, including governmental entities. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. Gross working capital is equal to current assets. Working capital is calculated as current assets minus current liabilities. If current assets are less than current liabilities, an entity has a working capital deficiency, also called a working capital deficit and negative working capital. A company can be endowed with assets and profitability but may fall short of liquidity if its assets cannot be readily converted into cash. Positive working capital is required to ensure that a firm is able to continue its operations and that it has sufficient funds to satisfy both maturing short-term debt and upcoming operational expenses. The management of working capital involves managing inventories, accounts rece ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Pierre Vernimmen
Pierre Vernimmen (12 April 1946 – 28 December 1996) was a French economist, professor at the HEC Paris and director of the consulting department of the Paribas investment bank. He was the author of ''Finance d'Entreprise'', a reference manual in corporate finance and accounting. Biography Pierre Vernnimen graduated from HEC Paris in 1968 and from the Harvard Business School. He began teaching at HEC Paris in 1968 and, at the age of 23, became the first coordinator of the founding team of the HEC finance department. He contributed to the development of corporate finance courses, created case studies, recruited and trained faculty, developed courses in corporate finance and banking management, and collaborated on courses related to capital markets. After persuading the Paribas Human Resources department to have its executives trained at HEC, he joined Paribas in 1973, where he spent the remainder of his career. Initially, he worked in the industrial department (shareho ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Cash Flow Return On Investment
Cash-flow return on investment (CFROI) is a valuation model that assumes the stock market sets prices based on cash flow, not on corporate performance and earnings. :\text = \frac For the corporation, it is essentially internal rate of return (IRR). CFROI is compared to a hurdle rate to determine if investment/product is performing adequately. The hurdle rate is the total cost of capital for the corporation calculated by a mix of cost of debt financing plus investors' expected return on equity investments. The CFROI must exceed the hurdle rate to satisfy both the debt financing and the investors expected return. :\text = \frac Michael J. Mauboussin in his 2006 book ''More Than You Know: Finding Financial Wisdom in Unconventional Places'', quoted an analysis by Credit Suisse First Boston, that, measured by CFROI, performance of companies tend to converge after five years in terms of their survival rates. The CFROI for a firm or a division can then be written as follows: ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Cash Surplus Value Added
Cash value added (CVA) is a measure of business profitability defined as the EBITDA generated by the business, less tax, less its required return. The required return is an annuity based on the purchase price of the assets in use in the business, inflated to today's value of money, the weighted average cost of capital (WACC) and the economic life of the assets. CVA can also be expressed as an index, where the CVA is divided by the required return. An index of more than 1.0 will indicate profitability while an index below 1.0 will indicate value destruction. See also *Economic value added (EVA) *Return on capital employed (ROCE) *Return on equity The return on equity (ROE) is a measure of the profitability of a business in relation to its equity; where: : Jason Fernando (2023)"Return on Equity (ROE) Calculation and What It Means" Investopedia Thus, ROE is equal to a fiscal year's net in ... (ROE) References Valuation (finance) Profit {{Finance-stub ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Economic Value Added
In accounting, as part of financial statements analysis, economic value added is an estimate of a firm's economic profit, or the value created in excess of the Required rate of return, required return of the types of companies, company's shareholders. EVA is the net profit less the capital charge ($) for raising the firm's capital. The idea is that value is created when the return on the firm's economic capital employed exceeds the cost of that capital. This amount can be determined by making adjustments to Generally accepted accounting principles, GAAP accounting. There are potentially over 160 adjustments but in practice, only several key ones are made, depending on the company and its industry. Calculation EVA is net operating profit after taxes (or NOPAT) less a capital charge, the latter being the product of the cost of capital and the economic capital. The basic formula is: : \begin \text & = ( \text - \text ) \cdot (\text - \text) \\[8pt] & = \text - \text \cdot (\text - \ ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Return On Assets
The return on assets (ROA) shows the percentage of how profitable a company's assets are in generating revenue. ROA can be computed as below: :\mathrm = \frac The phrase return on average assets (ROAA) is also used, to emphasize that average assets are used in the above formula. This number tells you what the company can do with what it has, ''i.e.'' how many dollars of earnings they derive from each dollar of assets they control. It's a useful number for comparing competing companies in the same industry. The number will vary widely across different industries. Return on assets gives an indication of the capital intensity of the company, which will depend on the industry; companies that require large initial investments will generally have lower return on assets. ROAs over 5% are generally considered good. Usage Return on assets is one of the elements used in financial analysis using the Du Pont Identity. See also *Return on equity (ROE) *List of business and finance abbre ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |