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Due to the way ROCE is calculated, a high level of current liabilities makes a company look as though it has less capital employed, and thus can (sometimes unfairly) boost the ROCE. Liabilities, such as supplier bills and bank overdrafts, are referred to as current liabilities if they need to be paid within 12 months. Story continues Do Radiant Logistics's Current Liabilities Skew Its ROCE? The image below shows how Radiant Logistics's ROCE compares to its industry, and you can click it to see more detail on its past growth. This makes us wonder if the company is improving. Our data shows that Radiant Logistics currently has an ROCE of 13%, compared to its ROCE of 5.9% 3 years ago. Regardless of where Radiant Logistics sits next to its industry, its ROCE in absolute terms appears satisfactory, and this company could be worth a closer look. It appears that Radiant Logistics's ROCE is fairly close to the Logistics industry average of 13%. ROCE is commonly used for comparing the performance of similar businesses. So, Radiant Logistics has an ROCE of 13%.Ĭheck out our latest analysis for Radiant Logistics Does Radiant Logistics Have A Good ROCE? Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)Ġ.13 = US$24m ÷ (US$293m - US$107m) (Based on the trailing twelve months to September 2019.)
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So, How Do We Calculate ROCE?Īnalysts use this formula to calculate return on capital employed: Author Edwin Whiting says to be careful when comparing the ROCE of different businesses, since 'No two businesses are exactly alike. Ultimately, it is a useful but imperfect metric. In general, businesses with a higher ROCE are usually better quality. ROCE measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Understanding Return On Capital Employed (ROCE) Then we'll determine how its current liabilities are affecting its ROCE. Then we'll compare its ROCE to similar companies. Specifically, we're going to calculate its Return On Capital Employed (ROCE), in the hopes of getting some insight into the business.įirst, we'll go over how we calculate ROCE. ( NYSEMKT:RLGT) to see whether it might be an attractive investment prospect. Today we are going to look at Radiant Logistics, Inc.