You can simply Develop an Effective Business Strategy

I thought ROCE, ROI and EPS are difficult financial measurements to apply, I was wrong: Here is what my Business Strategy Analyst simply explains

We want to develop an effective business strategy, but we don’t know how to go about. We also know a lot of financial measurements, but we don’t know if they can be used in evaluating business performance, making investment decisions and achieving long term growth.

That is when a business analyst comes and say, “You can’t be serious; you know financial measurements, you have a business idea, yet you cannot apply them to strategies your business”. Of course it is embarrassing! Then you say “Ooh, it’s true Sir, I don’t know, what if you treat me some key of them?”

Then the expert says, “Well, I am going to teach you at least three key financial measurements on how you can use them to develop an effective business strategy. They include Return on Capital Employed (ROCE), Return on Investment (ROI) and Earning per Share (EPS).”

#1. Return on Capital Employed (ROCE)

The expert says, “ROCE is used to measure how efficiently a business uses its capital to make profits”. He insists- to use its capital to make profit”.

Mathematically is obtained by dividing earnings before interest and tax (EBIT) by capital employed, then multiplying by 100 to get it in percentage.