Practicing Success
Which profitability Ratio explains the relationship of relation to investment? |
Operating Profit Ratio Operating Ratio Gross Profit Ratio Return on investment |
Return on investment |
Return on Capital Employed or Investment: It explains the overall utilisation of funds by a business enterprise. Capital employed means the long-term funds employed in the business and includes shareholders’ funds, debentures and long-term loans. Alternatively, capital employed may be taken as the total of non-current assets and working capital. Profit refers to the Profit Before Interest and Tax (PBIT) for computation of this ratio. Thus, it is computed as follows: |