Chapter 35 Analysis of Published Accounts (A Level)
▪ Share price: the quoted price of one share on the stock exchange.
▪ Dividend: the share of the company profits paid to shareholders.
Interpreting company performance through:
Profitability Ratios
Return on Capital Employed
Formula (%): Operating profit/capital employed x 100
Capital Employed: it refers to the total value of all long-term finance invested in the business: it is
equal to (non-current assets + current assets) – current liabilities or non-current liabilities +
shareholders’ equity.
Points to note:
● The higher the value of this ratio, the greater the return on the capital invested in the
business.
● The return can be compared both with other companies and the RoCE of the previous years’
performance. Making comparisons over time allows the trend of profitability in the company
to be identified etc…
Consider the following strategies which could be used in order to increase the RoCE