Measuring effectiveness
Managers and investors are being urged to consider how effectively a company employs its capital, rather than simply concentrating on net profits.
This effectiveness is exactly what ROCE measures. It is calculated as profit before interest and tax, divided by the difference between total assets and current liabilities. The resulting ratio represents the efficiency with which capital is being utilized to generate revenue.
At a ceremony recognising the efficiency of Polish companies, prizes were awarded in three categories. The winner in the services sector, represented by Bogusław Piekarski, was also the most effectively managed firm of all finalists, with ROCE at 162.6 percent (a 'good' ROCE in the EU is around 20 percent).
According to Thomas Kolaja, director of the CII Group consulting company, which is responsible for the content-related part of the ranking: "Managers in Poland still concentrate on the end profit value, through cost cuts or increasing profit margins, rather than on increasing the effectiveness with which to use a firm's capital." And for the owner or investor there is nothing more important than the question of whether the return gained is higher than the cost of the investment.
This effectiveness is exactly what ROCE measures. It is calculated as profit before interest and tax, divided by the difference between total assets and current liabilities. The resulting ratio represents the efficiency with which capital is being utilized to generate revenue.
At a ceremony recognising the efficiency of Polish companies, prizes were awarded in three categories. The winner in the services sector, represented by Bogusław Piekarski, was also the most effectively managed firm of all finalists, with ROCE at 162.6 percent (a 'good' ROCE in the EU is around 20 percent).
According to Thomas Kolaja, director of the CII Group consulting company, which is responsible for the content-related part of the ranking: "Managers in Poland still concentrate on the end profit value, through cost cuts or increasing profit margins, rather than on increasing the effectiveness with which to use a firm's capital." And for the owner or investor there is nothing more important than the question of whether the return gained is higher than the cost of the investment.
