Zeszyty Naukowe Małopolskiej Wyższej Szkoły Ekonomicznej w Tarnowie

The Małopolska School of Economics in Tarnów Research Papers Collection

ISSN 1506-2635, e-ISSN 2658-1817
2020, 46(2), 55–67
DOI: 10.25944/znmwse.2020.02.5567
© 2020 MWSE

Measurement of return on capital employed

in assessment of company’s condition

Sławomir Lisek Lidia Luty Monika Zioło

University of Agriculture University of Agriculture University of Agriculture
in Krakow, Poland in Krakow, Poland in Krakow, Poland
E-mail: [email protected] E-mail: [email protected] E-mail: [email protected]
ORCID: 0000-0001-6520-7203 ORCID: 0000-0001-8250-8331 ORCID: 0000-0003-0884-4083

Abstract: The return on capital employed, as a financial ratio, is an important

element of the assessment of the company’s condition. It shows the benefits
gained by company shareholders against the invested capital. It constitutes
the basic reason for investing in a particular enterprise. Thus, it is an impor-
tant diagnostic variable in the construction of a synthetic indicator of the
company’s financial standing. The aim of this article is to propose a univer-
sal, useful indicator of the profitability of capital which is fully relevant to
the formulation of company condition assessment indicators. It is assumed
that it should meet the following requirements: firstly, it should reflect the reality,
rather than falsify it; and, secondly, it should refer to the return on the entire
capital employed. The study has been conducted using the substantive ana-
lytical procedure as well as the empirical analysis based on ten companies
listed on Warsaw Stock Exchange.

Keywords: return on capital employed, financial analysis, enterprise, syn-

thetic indicator

Financed by:
Małopolska School of Economics
in Tarnów with support 1. Introduction
of the Ministry of Science
and Higher Education Irrespective of the approach to the definition of the com-
(“Support for scientific journals”) pany’s objectives, it can never be neglected that one of the
Correspondence to: company’s business objectives is to guarantee satisfying prof-
Sławomir Lisek its to its investor (Sudoł, 1999, pp. 65–67). Among the basic
Uniwersytet Rolniczy im. Hugona
Kołłątaja investor’s yield indicators there are those showing the return
Wydział Rolniczo-Ekonomiczny on capital employed (ROCE). That is why it seems justified
Katedra Statystyki i Polityki Społecznej
al. Mickiewicza 21
31-120 Kraków, Poland
Tel.: +48 12 662 43 31
56 Sławomir Lisek, Lidia Luty, Monika Zioło

to analyze ROCE indicators in terms of their usefulness for the presentation of the analyzed
problem. The ROCE is a diagnostic variable important for the construction of a synthetic in-
dicator of the company’s condition.
The aim of the article is to evaluate the ROCE indicators suggested in the relevant body of
literature and to propose an alternative indicator. It will be used for the construction of a syn-
thetic indicator of the company’s condition in the assessment which takes advantage of the
Multidimensional Comparative Analysis instruments.
The basic indicators of the return on capital employed (ROCE) include the return on equity
(ROE) (Table 1). This financial ratio shows the employment of every element of own capital
in the company’s operating activity: elements contributed both directly, such as the share capi-
tal or the share premium account, and indirectly, i.e. retained profits or capital revaluations. It
seems, prima facie, that this method of ROCE measurement is the best. It shows the employ-
ment of the entire equity and its returnability in profits. And, indeed, this is the case when the
analyzed company is profitable year after year and when its equity remains constant or is grow-
ing. A problem emerges when the company starts suffering such substantial losses that its equity
is marginal or even negative. In this situation the indicator may even lead to incorrect conclu-
sions. When the equity is marginal not due to the fact that the company has been underinvested
and uses mainly the foreign capital but rather as a result of the equity being decreased by cumu-
lated losses, then the indicator will show artificially high positive values (in the case of profit)
or negative values (in the case of loss), whereas in reality the company’s profitability may be
negligible. Having negative equity and increasing losses, the company will exhibit the ROCE
measured in this way as positive and, what is more, the bigger the losses, the higher the indica-
tor will be, so it will be interpreted as showing higher profitability.
Table 1. Indicators of return on capital employed proposed in economic literature

Author Indicator Formula Marking

Sierpińska and Jachna (1994)

Bednarski et al. (1996)
Bednarski (2007)
Jerzemowska (2004) return on equity ROE = Zn / Kw (1)
Jerzemowska (2018)
Nowak (2017)
Gabrusewicz (2019)

Bednarski et al. (1996)

Bednarski (2007)
Jerzemowska (2004)
return on share capital Rk = Zn / Kp (2)
Jerzemowska (2018)
Nowak (2017)
Gabrusewicz (2019)

Bednarski (2007) financial viability rk = Zn / S (3)

Tarczyński (2002) hypothetical profit Rh = Zn / (0,015Kw) (4)

W h e r e: Zn—net profit, Kw—equity, Kp—share capital, S—number of shares.

Measurement of return on capital employed in assessment of company’s condition 57

S o u r c e: Authors’ own elaboration based on: Bednarski et al., 1996, p. 80; Bednarski, 2007, p. 114;
Gabrusewicz, 2019, pp. 258–259; Jerzemowska (ed.), 2004, p. 295; Jerzemowska (ed.), 2018, pp. 304–305;
Nowak, 2017, pp. 221–222; Sierpińska, Jachna, 1994, p. 106; Tarczyński, 2002.

The return on share capital (2) shows a direct scale of benefits for the provider of the capi-
tal gained thanks to the company’s operating activity. At first sight, it seems the most univer-
sal illustration of the problem. However, it applies only to the share capital. Whereas equity
also has some other components which are, in one way or another, always contributed by the
owners. The share premium account is contributed together with the share capital as excess
of the nominal share capital invested. Retained profits also count as the capital contributed
by shareholders who thus refrain from taking dividends. The capital from valuation adjust-
ment of assets shows the realignment of the capital value (through valuation adjustment of
assets) with the current value of money. Indicator (2) completely disregards this part of the
contributed capital. Siemińska (2002) also used this measure to assess the company’s con-
dition. For the purposes of fundamental analysis, it was also used by Krzysztof and Teresa
Jajuga (Jajuga and Jajuga, 2015).
The indicator based on formula (3) seems to be the least useful. It informs about the profit from
one share. In no way does it show benefits for the investor because shares may have various val-
ues, so they may reflect various amounts invested. Therefore, there is no relation between the
profit and the invested amount and the indicator does not show the return on capital employed.
The hypothetical profit (4) is a kind of compromise between indicators (1) and (2). This
indicator, in compliance with the assumptions, should show how much the real profitability
exceeds the hypothetical, i.e. minimal, required return on capital employed.

2. Literature review
The measurement of the return on capital employed is a focus of both Polish and foreign
economic literature. Publications of Polish authors (Sierpińska and Jachna, 1994; Bednarski
et al., 1996; Jerzemowska et al., 2004; Bednarski, 2007; Nowak, 2017; Jerzemowska et al.,
2018; Gabrusewicz, 2019) present calculation methods (Table 1) or applications of an indi-
vidual indicator (assessment of the profit from the capital invested in the company). Foreign
authors most often measure the return on capital employed according to formula (1). Only
the net profit is sometimes replaced with the operating profit or with the profit before tax.
For instance, Graham and King (2000) used the ROE as one of the measures for examining
the relation between the carrying value and the market value of shares. In the assessment of the
impact of the difference in the accounting standards, especially in the use of the accruals prin-
ciple, on the financial analysis in international terms they employed the indicator of profit-
ability proposed by Lainez and Callao (2000) and King and Langli (1998). Indicator (1) was
used by Griffin and Zhu (2010) in the analysis of share repurchase records and share options.
On the other hand, Hung (2001) used the ROE to find out how the accounting standards, par-
ticularly the use of the accruals principle, affect safeguards for shareholders. The financial
ratio of the return on equity was also used by Rueschhoff and Strupeck (1998) in the analy-
sis of differences between the American accounting standards and the standards applicable
in thirteen countries examined by them. On the other hand, Brennan and Kraft (2018) used
58 Sławomir Lisek, Lidia Luty, Monika Zioło

it to assess the effects of financial decisions taken by managers in matters related to capital
structure formation.
A fundamental source of profitability assessment is properly conducted accounting and
proper financial reporting. Financial reporting and accounting has proved over time to be
a powerful practice, which is embedded in an institutional context and shapes economic and
social processes (e.g., Soll, 2015). Baker and Barbu (2007) indeed show that accounting has
been an integral part of human civilization for 4000 years. Soll (2015) demonstrates the re-
markable impact of accounting on the rise and fall of great nations. The founders of mod-
ern economic thought—from Adam Smith to Karl Marx—also considered accounting as es-
sential to developing successful businesses and modern capitalism (Soll, 2015). Accounting
affects a great variety of stakeholders: not only firms, investors, bankers, and auditors, but
also ordinary citizens, employees, and states. Accounting serves as a basis to set the limit for
distributable profits (Palea, 2015). Mainstream accounting research has mainly investigated
financial accounting by focusing on the economic consequences for shareholders (Hopwood,
2009; Callen, 2015; Sikka, 2015; Wilkinson and Durden, 2015).
Basing on the indicators of the company’s financial condition, a synthetic indicator of the finan-
cial condition can be formulated by means of the Multidimensional Comparative Analysis instru-
ments. Most frequently, it is constructed as a sum of standardized diagnostic indicators (Nowak,
1990; Tarczyński, 2002; Łuniewska and Tarczyński, 2006; Lisek and Luty, 2019). Variations in
the construction may be due to a different selection of indicators, method of variable standardi-
zation, or possibly a different method of variable weighing. Moreover, Lisek (2014) proposed in
his study an indicator of the company’s financial condition which is the arithmetic mean of the
standardized diagnostic variables. For the purposes of standardization the author uses the critical
value: the upper limit in the case of the stimulant and the lower limit in the case of the destimulant.

3. Postulated indicator of return on capital employed

An indicator of the return on capital employed should satisfy two requirements. Firstly, it
should reflect the reality, rather than falsify it; secondly, it should refer to the return on the
entire capital employed. The indicator based on formula (1) after modification seems to be
the most suitable here. The modification should eliminate the impact of unrelieved losses
from the previous years. The indicator may be calculated according to the following formula:

ROEM = Zn / (Kw + |L| – Zn) (5)

where:
ROEM—modified net return on equity
Zn—net profit from the analyzed year
Kw—equity
L—cumulated uncovered losses.

The indicator based on formula ROEM has two advantages. The denominator is not expressed
by a negative value, as a result there are no flaws in indicators (1) and (4). Moreover, the cur-
rent year’s result, which after all is not the capital employed yet, is eliminated from the equity.
Measurement of return on capital employed in assessment of company’s condition 59

Indicator ROEM applies to the entire capital employed, therefore it has all the advantages
of indicator (1). Its negative value always shows the company’s unprofitability, while its
positive value proves the company’s profitability. Thus, it is a universal indicator. It is worth
highlighting that it indicates the return on capital not burdened with the current year’s finan-
cial result. Therefore, it seems the best, universal indicator of the return on capital employed
in the company.

4. Empirical example
The sample for measuring the profitability of enterprises with the use of the formulas pre-
sented in Table 1 and the proposed indicator according to formula (5) was based on purposeful
selection. The sample group of companies included those listed on Warsaw Stock Exchange
(GPW) which declare profit (SARE, WAWEL, Aplisens, Orlen, PGNiG) or which are in loss
(ABM Solid, Interbud Lublin, Wikana), those which have positive equity (SARE, WAWEL,
Aplisens, Orlen, PGNiG, Wikana) or negative equity (ABM Solid, Interbud Lublin).
The net result for most of the surveyed companies is generally stable over time. Only slight
fluctuations can be observed. For three companies (Orlen, Interbud, ABM Solid) the finan-
cial result in one year is significantly different from that recorded in the other analyzed years.
The equity of only the companies: Aplisens, SARE and Wawel systematically increases over
time. For the remaining ones included in the survey, it usually remains at the same level in
subsequent years. On the contrary, the core capital of most companies is stable in the years.
Table 2. Net profit, equity, share capital of companies, designations according to formula (5)

Year
Company Indicator
2013 2014 2015 2016 2017 2018

Zn 727 2078 1346 1882 920 −7667

ABM Kw −169,700 −167,622 −166,270 −164,542 −163,622 −171,133

Solid Kp 3412 3412 3412 3412 3412 3412

S 7934 7934 793 793 793 793

Zn 14,184 13,721 13,749 13,324 19,263 13,304

Kw 117,113 119,340 131,745 142,391 148,324 157,568

Aplisens
Kp 2647 2694 2641 2641 2626 2519

S 13,237 13,470 13,203 13,203 13,130 12,593

Zn −14,302 –25,865 6981 −29,736 −1607 −5007

Interbud Kw 47,356 21,491 28,472 −1265 −2872 −7879

Lublin Kp 702 702 702 702 702 702

S 7016 7016 7016 7016 7016 7016

60 Sławomir Lisek, Lidia Luty, Monika Zioło

Zn 618,000 −4,672,000 1,048,000 5,364,000 6,102,000 5,434,000

Kw 23,135,000 16,302,000 17,846,000 22,168,000 27,565,000 31,634,000

Orlen
Kp 1,058,000 1,058,000 1,058,000 1,058,000 1,058,000 1,058,000

S 428,000 428,000 428,000 428,000 428,000 428,000

Zn 1,688,000 1,895,000 1,472,000 2,576,000 2,034,000 3,289,000

Kw 22,969,000 23,780,000 23,738,000 25,228,000 26,033,000 28,833,000

PGNiG
Kp 5,900,000 5,900,000 5,900,000 5,900,000 5,778,000 5,778,000

S 5,900,000 5,900,000 5,900,000 5,778,000 5,778,000 5,778,000

Zn 26 571 583 1439 173 1067

Kw 2965 3584 9955 10,941 11,114 12,167

SARE
Kp 222 222 222 229 229 229

S 2216 2216 2216 2292 2292 2292

Zn 80,467 88,035 92,868 85,086 113,322 77,256

Kw 372,172 429,356 491,578 550,308 630,704 670,238

Wawel
Kp 7499 7499 7499 7499 7499 7499

S 1500 1500 1500 1500 1500 1500

Zn −12,048 −13,620 −3159 −3048 −2916 −97

Kw 42,133 40,852 38,051 35,149 32,233 32,137

Wikana
Kp 33,533 40,030 40,030 40,030 40,030 40,030

S 167,666 167,666 20,015 20,015 20,015 20,015

W h e r e: Zn—net profit, Kw—equity, Kp—share capital, S—number of shares, Zn, Kw, Kp—thousands PLN,
S—thousands of shares.

S o u r c e: Authors’ own elaboration based on GWP, 2013–2020.

Table 3. Cumulated undivided losses markings according to the formula (5)—thousands PLN

Year
Company
2013 2014 2015 2016 2017 2018

ABM Solid −252,749 −252,022 −249,944 −248,598 −246,715 −245,796

Aplisens 0 0 0 0 0 0

Interbud Lublin 32,692 18,391 −7474 −30,230 −30,230 −31,837

Orlen 20,064,000 20,059,000 14,656,000 14,846,000 18,925,000 23,718,000

PGNiG 13,627,000 14,420,000 15,144,000 11,829,000 16,451,000 17,074,000

SARE 0 0 −575 13 13 −1
Measurement of return on capital employed in assessment of company’s condition 61

Wawel −181 −181 −181 −181 −181 −181

Wikana −40,577 −52,625 −66,245 −69,404 −72,452 −75,367

S o u r c e: Authors’ own elaboration based on GWP, 2013–2020.

Table 4. Indicators of return on capital employed of selected companies in 2018

Indicator
Company
(1) (2) (3) (4) (5)

ABM Solid 0.045 −2.247 −9.668 2.987 −0.093

Aplisens 0.084 5.281 1.056 5.629 0.092

Interbud Lublin 0.635 −7.132 −0.714 42.366 −0.173

Orlen 0.172 5.136 12.696 11.452 0.207

PGNiG 0.114 0.569 0.569 7.605 0.129

SARE 0.088 4.659 0.466 5.846 0.096

Wawel 0.115 10.302 51.504 7.684 0.130

Wikana −0.003 −0.002 −0.005 −0.201 −0.001

S o u r c e: Authors’ own elaboration.

Indicator (1) for companies: Orlen, PGNiG, Aplisens, WAWEL, SARE, has similar values
to those calculated according to formula (5). It applies to the profitability of the entire capital,
i.e. it can be said that in standard cases it is a good measurement of the return on capital em-
ployed. Unfortunately, a problem appears when the case is not a standard one. First and fore-
most, it refers to the company with negative equity. In this case, ABM Solid is not profitable.
However, due to negative equity, the indicator has the positive value, informing of the alleged
profitability of the company and its good financial condition. But, as a matter of fact, in the
analyzed year the company is not profitable. Similar situation is observed in the case of In-
terbud Lublin. Thus, indicator (1) is a good measurement instrument, but not a universal one.
It presents a false picture of the company’s condition when the company has negative equity.
The profitability of capital expressed by indicator (2) is free from the flaws characterizing
indicator (1). Equity must always be positive (at least in the case of the capital company), so
the indicator will always be positive for a profitable company and negative for an unprofit-
able company. However, it applies only to a part of the equity. In the case of half of the ex-
amined companies the share capital does not make even 10% of the equity. Therefore, the
indicator ignores an immense part of the capital employed (mainly in the form of the share
premium account or retained profits), sometimes yielding artificially high values.
Indicator (4) is practically identical with indicator (1). The only point of difference is that
the equity in the denominator is substituted with 0.015 of that capital, being the critical value
of return on capital at the time of indicator formulation. It has all the flaws of indicator (1).
 62 Sławomir Lisek, Lidia Luty, Monika Zioło

Indicator (3), like indicator (2), is free from the flaws of indicator (1). As mentioned earlier,
In standard
it does not apply cases, indicator
to the value (5) only
of the capital slightly
but rather to thedeviates
number offrom
shares,indicator
which may(1).
varyHowever,
in the company and the number of shares does not reflect the amount of capital invested. This
case of ABM Solid Company and Interbud Lublin it correctly illustrates their
indicator may be used by the investor to analyze the ratio of the market value to the profit
rather than to assess
unprofitability the company’s
of capital. Thus,financial standing.has all the advantages of instrument (1)
the indicator
In standard cases, indicator (5) only slightly deviates from indicator (1). However, in the
much more
case of ABM universal.
Solid Company and Interbud Lublin it correctly illustrates their huge unprof-
itability of capital. Thus, the indicator has all the advantages of instrument (1) and is much
The capital profitability measure is an important diagnostic variable taken into acco
more universal.
assessing the profitability
The capital condition measure
of companies, in particular
is an important diagnosticwhen wetaken
variable compare them.inThus, the
into account
assessing the condition of companies, in particular when we compare them. Thus, the way
is itdefined has a significant impact on the correctness of the information contained
is defined has a significant impact on the correctness of the information contained in the
synthetic measure.
synthetic measure.
The condition of companies was analyzed with the following indicator (Lisek, 2014):
The condition of companies was analyzed with the following indicator (Lisek, 2014)
ଵ ௑ ௑ ௑ ଵǡଶ
భ
݉ ൌ ସ ቀ଴ǡ଴ଷ మ
൅ ଴ǡ଴ଵ଼ య
൅ ଵǡ଴଴ ൅௑ ቁ (6)
ర

where:
where:
m—company’s condition evaluation
m—company’s condition evaluation
X1—return
X1—return onon assets(ROA):
assets (ROA): the
theratio of the
ratio company’s
of the net profit
company’s nettoprofit
the value
to of
theitsvalue
assets;of
informs about informs ab
its assets;
the company’s capacity to generate profits and about the asset management effectiveness
company’s
X2—net capacity to generate
return on equity: definedprofits
by oneand about the
of formulas asset management
(1)—(5); effectiveness
shows how much profit was made by the
company from the equity
X2—net returnliquidity:
X —quick on equity: defined
the ratio by one
of the value ofcompany’s
of the formulascurrent
(1)—(5);
assets shows
reduced how much profit
by inventories to the was made
3
value of
company the company’s
from the equitycurrent liabilities; shows what possibilities there are to settle the current liabilities
with the most liquid company assets
X3—quick liquidity:
X4—general level ofthe ratio
debt: of theofvalue
the value of the company’s
the company’s current
total liabilities assets
to its total reduced
assets; byininventories
describes general to the
the financing structure of the company’s assets.
the company’s current liabilities; shows what possibilities there are to settle the current liabilities with t
liquid company
Indicator m assets
is the arithmetic mean of the standardized diagnostic variables, whereby the
X4—general level involves:
standardization of debt: the value of the company’s total liabilities to its total assets; describes in gen
–– in the case of the stimulants—division of the value of the diagnostic variable by the criti-
financing structure of the company’s assets.
cal value, i.e. the lower limit of the diagnostic variable;
–– in the case of the destimulants—multiplication of the inversed value of the diagnostic
variable by the critical value, i.e. the upper limit of the diagnostic variable.
Indicator m is the arithmetic mean of the standardized diagnostic variables, where
Owing to the method of variable standardization, indicator m shows directly if the analyzed
company is in good
standardization or bad condition, rather than showing only its relative rank in the group
involves:
of analyzed companies. The neutral value of this indicator equals one. If, for a particular
– in the
company, case of isthe
the indicator stimulants—division
higher than one, it means thatof
thethe valueisof
company the diagnostic
in good condition; if variable
the indicator is lower
critical value,than
i.e.one,
thethe company
lower limitisof
in the
bad condition.
diagnostic variable;
This is due to the fact that there are usually no cumulative losses, and total equity changes
in –a manner
in thecorrelated
case of with
the the
destimulants—multiplication of the
share capital. However, this usually inversed
happens. value of the diag
In a particular
enterprise, there may be negative equity due to accumulated losses and then other measures
variable by the critical value, i.e. the upper limit of the diagnostic variable.
of capital profitability, except for the formula (5) lead to erroneous conclusions.
Owing to the method of variable standardization, indicator m shows directly
analyzed company is in good or bad condition, rather than showing only its relative r
Measurement of return on capital employed in assessment of company’s condition 63

Table 5. Pearson’s linear correlation coefficient between measures of capital profitability

of selected companies in 2018

Indicator

(1) (2) (3) (4) (5)

(1) 1.000 −0.559 −0.050 1.000 −0.521

(2) – 1.000 0.718 −0.559 0.840

Indicator (3) – – 1.000 −0.049 0.464

(4) – – – 1.000 −0.521

(5) – – – – 1.000

S o u r c e: Authors’ own elaboration.

Table 6 presents synthetic indicator m in different variants (according to formulas (1)–(5),

respectively) for variable X2.
Table 6. Synthetic indicator (m) for selected companies in 2018 with net return
on equity calculated from formulas (1)–(5), respectively

Value of indicator m
Company
(1) (2) (3) (4) (5)

ABM Solid −1.368 −20.467 −82.311 23.148 −2.518

Aplisens 8.621 51.929 8.621 54.824 8.686

Interbud Lublin 4.445 −60.288 −6.798 352.198 −2.291

Orlen 3.635 45.004 108.005 97.635 3.931

PGNiG 3.446 7.239 7.239 65.868 3.569

SARE 1.930 40.028 5.079 49.919 2.000

Wawel 4.598 89.489 4.598 67.674 4.723

Wikana 0.853 0.858 0.838 −0.799 0.871

S o u r c e: Authors’ own elaboration based on GWP, 2013–2020.

The value of the synthetic indicator of the company’s condition (m) based on the return
on capital calculated from formula (1) is only insignificantly different from the indicator based on
the return on capital calculated from formula (5) (Table 3). The synthetic indicators based on the
indicators of return on capital calculated from formulas (2)–(4) are significantly different
from the ones based on formulas (1) or (5). However, in non-standard cases the differences are
substantial. In the case of ABM Solid the synthetic indicator based on the calculation of the
return on capital from formula (5) is almost twice as high as the one based on the calculation
of the return on capital from formula (1). On the other hand, the analysis of Interbud based on
indicator m in one situation (when the return on capital is based on formula [4]) points to its
64 Sławomir Lisek, Lidia Luty, Monika Zioło

excellent condition and in another situation (when X2 is based on formula [5]) demonstrates its
poor financial standing. Taking into consideration the colossal loss and very negative equity, it
is obvious that the correct conclusions can be drawn from the calculations based on formula (5).
Positions of the companies vary in rankings (Table 7) based on synthetic indicator m with
the defining variants of X2, which is demonstrated by the estimated correlation coefficients of the
ranks by Spearman (Table 8).
Table 7. Positions of companies by synthetic indicator m calculated from net return
on equity defined by formulas (1)–(5), respectively

Ranking
Company
R(1) R(2) R(3) R(4) R(5)

ABM Solid 3 8 7 1 7

SARE 5 5 3 4 4

Interbud Lublin 8 7 8 7 8

Wikana 7 6 6 8 6

Wawel 1 2 2 5 1

Aplisens 2 1 5 3 2

Orlen 4 3 1 2 3

PGNiG 6 4 4 6 5

S o u r c e: Authors’ own elaboration.

In ranking (1) the third position is occupied by AMB Solid and in ranking (3) the first posi-
tion is occupied by the same firm, the company which is classified on much lower positions
in the other rankings. Remarkably, Orlen has an exceptionally low position in ranking (1).
Regardless of the ranking, high positions were taken by Orlen and Aplisens. However, mid-
dle in the rankings are SARE and PGNiG. The last positions in the ranking are occupied by
Interbud Lublin and ABM Solid.
Table 8. Correlation coefficient of ranks by Spearman for particular rankings

Ranking

R(1) R(2) R(3) R(4) R(5)

R(1) 1.000 0.794 0.733 0.830 0.879

R(2) – 1.000 0.842 0.564 0.937

Ranking R(3) – – 1.000 0.636 0.903

R(4) – – – 1.000 0.636

R(5) – – – – 1.000

S o u r c e: Author’s own elaboration.

0): R(1) and R(4), R(2), and R(5) as well as R(3) and R(5) (Table 8). It proves that in the
mparative analysis of companies the method of definition of return on capital plays an
Measurement of return on capital employed in assessment of company’s condition
portant role. 65

If we assess the condition of companies in 2013–2018 using the measure, when we define
The following rankings are significantly correlated (p values < 0.05) (Kukuła, 1998, p. 190):
net return(1) on
R and equity ratio
R(4), R(2), and R(5)according
as well as R(3)to
andformula
R(5) (Table(5),
8). Itwe note
proves thatthat
in thewith the exception
comparative analy- of
sis of companies the method of definition of return on capital plays an important role.
14, Aplisens is assess
If we the highest
the conditionclassified
of companies company, i.e. ausing
in 2013–2018 company characterized
the measure, by high
when we define
ofitability,thehigh
net return on equity
liquidity and ratio
low according to formula with
debt. Companies (5), wea note thatposition,
stable with the exception
such asofOrlen,
2014, Aplisens is the highest classified company, i.e. a company characterized by high profit-
NiG andability,
Wawel, occupyand
high liquidity high
low positions
debt. Companiesin the withsurveyed years.such
a stable position, Onas the
Orlen,contrary,
PGNiG the
and Wawel, occupy high positions in the surveyed years. On the contrary, the rankings close
kings close Wikana, ABM Solid and Interbud Lublin companies, which had financial
Wikana, ABM Solid and Interbud Lublin companies, which had financial problems in the
oblems in examined
the examined
years. years.

Figure 1. Measure values in 2013–2018

Figure 1. Measure values in 2013–2018
e: The net profitability
N o t e: The netof the criteria
profitability setscriteria
of the is defined
sets is according to formula
defined according (5). (5).
to formula

urce: Authors’
S o uown
r c e:elaboration
Authors’ ownbased on GWP,
elaboration based 2013–2020.
on GWP, 2013–2020.

5. Conclusions
5. Conclusions
The indicator of return on capital employed calculated as a ratio of the net profit to the eq-
The indicator
uity is aofuseful
return on capital
instrument, employed
although calculated
only if there as a ratio
are no significant of the losses.
cumulated net profit
How-to the
uity is a ever,
usefulit is not useful if the equity is negative. On the other hand, the profitability of share capi-
instrument, although only if there are no significant cumulated losses.
tal cannot be applied to the entire capital. What seems to be the best indicator is the return on
equity adjusted by the undivided result from the previous years and the current year’s result.
This indicator applies to the entire capital employed, therefore it has all the advantages of the
ROA indicator. Its positive value means that the company is profitable and its negative value
shows that the company is unprofitable. It illustrates the return on the company’s capital not
66 Sławomir Lisek, Lidia Luty, Monika Zioło

burdened with the current year’s financial result. Therefore, it seems the best, universal indi-
cator of the return on capital employed in the company.
By the same token, it seems justified to use the return of capital defined in this way in the
construction of the synthetic indicator of the company’s condition.

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Pomiar zyskowności kapitałowej jako element oceny kondycji

finansowej przedsiębiorstwa

Abstrakt: Pomiar zyskowności kapitałowej przed- w pełni przydatnego do konstruowania miary oceny
siębiorstwa jest ważnym elementem oceny jego kon- kondycji przedsiębiorstw. Zakłada się, że powinien
dycji. Odzwierciedla korzyści udziałowców firmy od on spełniać następujące postulaty: po pierwsze, dawać
jednostki zainwestowanego kapitału. Stanowi podsta- prawdziwy obraz sytuacji, nie zafałszowywać go, a po
wową przesłankę do inwestowania w przedsiębiorstwo. drugie, odnosić się do rentowności całego zainwesto-
Tym samym jest ważną zmienną diagnostyczną w kon- wanego kapitału. W pracy zastosowano metodę analizy
strukcji syntetycznego miernika kondycji finansowej merytorycznej, a także analizę empiryczną na przykła-
firm. Celem artykułu jest zaproponowanie uniwersal- dzie ośmiu spółek notowanych na Giełdzie Papierów
nego, użytecznego miernika zyskowności kapitałowej, Wartościowych w Warszawie (GPW).

Słowa kluczowe: rentowność kapitałowa, analiza finansowa, przedsiębiorstwo, miara syntetyczna