Mind explaining what is the difference between both ROIC and ROCE and what's the formula being used for those two?

From what I understand from Mckinsey Valuation book, ROIC = NOPLAT/(Operating Assets-Operating Liabilities)

Not too sure about ROCE. Hope you guys could help to clarify on this.

Thanks all.

Comments (5)


ROCE = (NI - Pref Div) / Common Equity
ROIC factors all capital into the mix, and not just common equity.

P.S. - Not sure if there is any truth to it, but I have heard it said that Damodaran does a better job of writing a textbook than the McK guys do.

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Hi Angus.

Thanks for your reply. My bad, I was referring to return on capital employed actually.



Ah. In that case, then... common definition would be... NOPAT / (Total Assets - Current Liabilities)...?


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