# Return On Capital Employed And Return On Equity Employed

Can anyone clarify for me the following

Return on Capital Employed = Profit before tax and interest / Equity plus Long Term Loans all multiplied by 100 to get a percentage - is this correct?

Return on Equity = Profit before tax and interest/Equity multiplied by 100 to get a percentage - is this correct as an answer to a question I had yesterday indicated that the profit figure you use is before tax BUT after interest - can someone tell me which one is correct as now getting a little bit confused!:confused1:

Return on Equity = Profit before tax and interest/Equity multiplied by 100 to get a percentage
I would use
Return on Equity = Profit after tax and interest/Equity multiplied by 100 to get a percentage
Afterall we are looking for how much the shareholders have had as a return on their investment, and they don't get their money until the interest has been paid and the tax determined.
Sandy
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www.sandyhood.com
• Thanks Sandy

I'll now attempt to reteach myself that equation LOL

I assume the one I had for Capital Employed was correct?

I failed the DFS exam on section 2 in June and am driving myself nuts trying not only to learn the ratios but also to fully understand what they are but sometimes I lose the logic thread - thanks for your help