Companies ensure that they provide better returns to their investors with the addition of leverage in their total capital, and thus show higher profitability and returns. We also previously understood to evaluate a company's profitability and rate of returns to its investors with the use of Return on Assets (ROA) and Return on Equity (ROE) ratios. However, in order to understand how the company is using its total capital, one must know the rate of returns on the total capital employed. This is known as the return on capital employed ratio.
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