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On Capital Employed Looks Uninspiring (67 visualizações)
On Capital Employed Looks Uninspiring Postado em 11/03/2019 04:37 por alisawhite456
Today we’ll evaluate Foley Family Wines Limited (NZSE:FWL) to determine whether it could have potential as an investment idea. Specifically, we’re going to calculate its Return On Capital Employed Newport 100's soft pack cigarettes - Cheap Cigarettes Online Sale Shop (ROCE), in the hopes of getting some insight into the business.
Firstly, we’ll go over how we calculate ROCE. Second, we’ll look at its ROCE compared to similar companies. Finally, we’ll look at how its current liabilities affect its ROCE.ROCE measures the amount of pre-tax profits a company can generate from the capital employed in its business. All else being equal, a better business will have a higher ROCE. In brief, it is a useful tool, but it is not without drawbacks. Renowned investment researcher Michael Mauboussin has suggested that a high ROCE can indicate that ‘one dollar invested in the company generates value of more than one dollar’.
When making comparisons between similar businesses, investors may find ROCE useful. We can see Foley Family Wines’s ROCE is meaningfully below the Beverage industry average of 11%. This could be seen as a negative, as it suggests some competitors may be employing their capital more efficiently. Independently of how Foley Family Wines compares to its industry, its ROCE in absolute terms is low; especially compared to the ~2.4% available in government bonds. Readers may wish to look for more rewarding investments.
When considering ROCE, bear in mind that it reflects the past and does not necessarily predict the future. ROCE can be deceptive for cyclical businesses, as returns can look incredible in boom times, and terribly low in downturns. ROCE is, after all, simply a snap shot of a single year. You can check if Foley Family Wines has cyclical profits by looking at this
Current liabilities include invoices, such as supplier payments, short-term debt, or a tax bill, that need to be paid within 12 months. Due to the way the ROCE equation works, having large bills due in the near term can make it look as though a company has less capital employed, and thus a higher ROCE than usual. To check the impact of this, we Newport Cigarettes Suppliers, all Quality Newport Cigarettes calculate if a company has high current liabilities relative to its total assets.

Foley Family Wines has total assets of NZ$148m and current liabilities of NZ$14m. As a result, its current liabilities are equal to approximately 9.7% of its total assets. Foley Family Wines has a low level of current liabilities, which have a negligible impact on its already low ROCE.












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Alisa Wang / alisa086

On Capital Employed Looks Uninspiring (67 previews)
 
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