ROCE stands for:

ROCE stands for:

• A. A measure of liquidity
• B. A measure of solvency
• C. A measure of profitability relative to capital employed
• D. A measure of credit risk

Answer: (D)

ROCE is a profitability measure that shows how effectively a business uses the capital invested to generate profits. It compares operating profit (earnings before interest and taxes) to capital employed (the funds used to run the business, often total assets minus current liabilities, or equity plus non-current liabilities). A higher ROCE indicates that each unit of capital is producing more profit, so it’s useful for comparing performance over time or between firms with different capital bases. It isn’t about liquidity (ability to meet short-term obligations), solvency (long-term debt sustainability), or credit risk (likelihood of default).

ROCE is a profitability measure that shows how effectively a business uses the capital invested to generate profits. It compares operating profit (earnings before interest and taxes) to capital employed (the funds used to run the business, often total assets minus current liabilities, or equity plus non-current liabilities). A higher ROCE indicates that each unit of capital is producing more profit, so it’s useful for comparing performance over time or between firms with different capital bases. It isn’t about liquidity (ability to meet short-term obligations), solvency (long-term debt sustainability), or credit risk (likelihood of default).