Abstract
This paper is in two parts. The first consists of an examination of the main weakness of the Return on Capital Employed (R.O.C.E.) concept, and provides suggestions as to the ways in which these weaknesses may be overcome. The principal findings are that R.O.C.E. or indeed any other management ratio, is inadequate if used as a sole yardstick for planning and control, but that as part of a family of ratios and important financial relationships such as earnings per cost of capital, it takes its place in a powerful managerial tool-kit, which provides an essential aid to profitable growth in an increasingly complex business environment. The second section of the paper deals with a number of problems arising from the divisional use of the R.O.C.E. concept, and examines its important role of linking the operations of the segments of a business with the corporate objectives set for the whole.
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