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The measurement of return on capital employed in assessment of company’s condition

Sławomir Lisek (), Lidia Luty () and Monika Zioło ()
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Sławomir Lisek: University of Agriculture in Krakow, Poland
Lidia Luty: University of Agriculture in Krakow, Poland
Monika Zioło: University of Agriculture in Krakow, Poland

Zeszyty Naukowe Małopolskiej Wyższej Szkoły Ekonomicznej w Tarnowie / The Malopolska School of Economics in Tarnow Research Papers Collection, 2020, vol. 46, issue 2, 55-67

Abstract: The return on capital employed, as a financial ratio, is an important element of the assessment of the company’s condition. It shows the benefits gained by company shareholders against the invested capital. It constitutes the basic reason for investing in a particular enterprise. Thus, it is an important diagnostic variable in the construction of a synthetic indicator of the company’s financial standing. The aim of this article is to propose a universal, useful indicator of the profitability of capital which is fully relevant to the formulation of company condition assessment indicators. It is assumed that it should meet the following requirements: firstly, it should reflect the reality, rather than falsify it; and, secondly, it should refer to the return on the entire capital employed. The study has been conducted using the substantive analytical procedure as well as the empirical analysis based on ten companies listed on Warsaw Stock Exchange.

Keywords: return on capital employed; financial analysis; enterprise; synthetic indicator (search for similar items in EconPapers)
JEL-codes: G32 D24 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:znm:journl:v:46:y:2020:i:2:p:55-67

DOI: 10.25944/znmwse.2020.02.4567

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