How are balance sheet profitability ratios (ROA, ROE, ROCE/ROIC) used specifically for credit analysis?
I can't find an good intuitive explanations I'm happy with on Investopedia.
1. Is ROE useful at all in the realm of credit?
2. How is ROCE (capital employed) used in comparison to ROA? My understanding is that ROCE should be above the average interest rates of the debt financing the company; if it's not at least that then the capital employed is barely making enough to fund itself.
For ROA, it kind of makes sense in that it's basically a matter of if what the company owns is being used to make good profits, but if I can't really place my finger on when you'd specifically look at ROA vs ROCE and what you'd learn from one but not the other.
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