ANALYSIS MODEL FOR RETURN ON CAPITAL EMPLOYED

Abstract

At the microeconomic level, the appreciation of the capitals’ profitability is a very complex action which is ofinterest for stakeholders. This study has as main purpose to extend the traditional analysis model for the capitals’profitability, based on the ratio “Return on capital employed”. In line with it the objectives of this work aim theidentification of factors that exert an influence on the capital’s profitability utilized by a company and the measurementof their contribution in the manifestation of the phenomenon. The proposed analysis model is validated on the use caseof a representative company from the agricultural sector. The results obtained reveal that in a company there are somefactors which can act positively on the capitals’ profitability: capital turnover, sales efficiency, increase the share ofsales in the total revenues, improvement of the expenses’ efficiency. The findings are useful both for the decisionmakingfactors in substantiating the economic strategies and for the capital owners who are interested in efficiency oftheir investments.

Keywords

• profitability
• capital employed
• profitability ratios
• financial analysis