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Why We Like Macpower CNC Machines Limited's (NSE:MACPOWER) 23% Return On Capital Employed


Added 07-07-19 10:04:02pm EST - “Today we'll evaluate Macpower CNC Machines Limited (NSE:MACPOWER) to determine whether it could have potential as an...” - News.yahoo.com

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Posted By TheNewsCommenter: From News.yahoo.com: “Why We Like Macpower CNC Machines Limited’s (NSE:MACPOWER) 23% Return On Capital Employed”. Below is an excerpt from the article.

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Today we'll evaluate Macpower CNC Machines Limited (NSE:MACPOWER) to determine whether it could have potential as an investment idea. Specifically, we'll consider its Return On Capital Employed (ROCE), since that will give us an insight into how efficiently the business can generate profits from the capital it requires.

First up, we'll look at what ROCE is and how we calculate it. Second, we'll look at its ROCE compared to similar companies. Then we'll determine how its current liabilities are affecting its ROCE.

ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. In general, businesses with a higher ROCE are usually better quality. Ultimately, it is a useful but imperfect metric. Author Edwin Whiting says to be careful when comparing the ROCE of different businesses, since 'No two businesses are exactly alike.'

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

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