Return on Capital Employed

The Return on Capital Employed is Earnings before interest and taxes/total assets-current liabilities.

The return on capital employed has to be more than the cost of capital or the company will go bankrupt. If the company borrows money at 8%, it better make more than 8% in profits or they won’t have enough money to pay back the bank and continue on in business.

https://accounting.uworld.com/cpa-review/lc/accounting-dictionary/term/return-on-capital-employed/