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You have reached a level where further capital investment is counter productive. This may be because you have created an imbalance between labour and capital, or that you have reached a point where economies of scale no longer apply. This may be a point where the capital employed needs to make a step increase, rather than a gradual increase.

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Why is decreasing ROCE bad?

Decreasing Return on Capital Employed (ROCE) is concerning because it indicates that a company is generating less profit for each unit of capital invested, suggesting declining operational efficiency. This trend can signal potential issues such as poor management decisions, ineffective asset utilization, or increasing costs. Moreover, a lower ROCE can make the company less attractive to investors, potentially leading to reduced capital investment and impacting future growth. Overall, it raises red flags about the company's financial health and sustainability.


What does the acronym ROCE stand for?

The acronym ROCE stands for "return on capital employment". The term ROCE is used in accounting to refer to the ratio of efficiency and profitability to capital investments.


What is ROCE?

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What is meant by ROCE?

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What is the remuneration of capital?

It is similar to Return on capital employed (ROCE).


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What happens if ROCE is negative?

If Return on Capital Employed (ROCE) is negative, it indicates that a company is not generating enough profit from its capital investments to cover its costs. This situation can raise concerns about the company's operational efficiency and financial health, as it suggests that the business is losing money on the capital it employs. Investors may view a negative ROCE as a red flag, potentially leading to decreased confidence and a drop in stock value. Additionally, persistent negative ROCE could hinder a company's ability to attract future investment or secure financing.


What is the average roce ratio for automotive industry?

The average Return on Capital Employed (ROCE) ratio for the automotive industry typically ranges from 5% to 15%, depending on various factors such as market conditions, company efficiency, and geographic location. Established manufacturers often report higher ROCE due to economies of scale, while newer entrants may have lower ratios as they invest heavily in growth. It's essential to consider individual company performance and market dynamics when assessing ROCE within this sector.


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