Professional Documents
Culture Documents
N Balachandra Mallya
PGPF/02/019
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ROCE = %&'()&* !,'*-./0
Unlike other profitability measures like ROE, ROCE considers both debt and equity, it would
be more relevant for comparing capital-intensive industries in similar sectors. The higher the
ROCE value, the more efficiently the company's capital is used. Investors prefer
organizations with stable or rising ROCEs because it is a key performance indicator for any
business. Shareholders' equity and long-term debts are the capital employed in the ROCE
ratio.
Deferred Tax Asset : DTA is created when the company overpays its taxes, and the money
will eventually be refunded as Tax relief. The company may overpay its taxes in a number of
circumstances, such as when a difference in depreciation causes it to pay more taxes than
reflected in its books; when there is a difference in the timing of recognising revenues for
accounting and tax purposes; and when a loss in a business is carried forward to reduce taxes
in subsequent years.
Deferred Tax Liability : It implies the responsibility to pay taxes in the future, which arises
when the taxes paid for accounting purposes are greater than those paid for tax purposes. This
can also raise to due to the when tax depreciation being greater than accounting depreciation.
In addition, the greater Provisions, and Expenses/Loss line items for tax purposes as
compared to accounting purposes will also result in DTL.