What's the Difference Between ROE, ROI & ROCE | How to Buy a Business
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- Опубліковано 28 сер 2024
- Learn to buy a business: www.BusinessBuy...
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Investors and business people are always talking about returns…
Trouble arises when you get your words mixed up. It can lead to confusion.
Watch as I show the difference between Return on Investment, Return on Equity and Return on Capital Employed.
Fun and excitement right here: • What's the Difference ...
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Thanks David, your vedios are intensely educational. I am based in South Africa and have never had all this information explained in so much detail. I subscribed immediately and looking at taking your courses as I am interested in buying a small business soon.
Glad to have been so helpful Thelma. Let me know how it goes.
Amazing factual content 🎉
Glad you think so! Happy to share.
Really good explanation 👏
Glad it was helpful.
Dude, your info is dope. I just stumbled upon your site today and SUBSCRIBED. After perusing your channel however, my only complaint is how your videos are organized. I think if you put videos pertinent to the subjects in smaller play lists you get a lot more traffic and a lot more subscriptions. I spend probably 40 hours a week on UA-cam. Believe me people are checking you out and they’re checking out because they’re frustrated of your organization of your videos. Just trying to help man I’m not gonna not be subscribed, and I’ll buy book or two of yours, but I mean you put the time and effort and so you might as well reap some more benefit. Like 179 videos in the play list on buying and selling business? They should be parsed out in more relatively linear steps of what you think is most important, and then sub categories within that. I’m literally only taking the time to comment because I think your content is phenomenal, and I think you should get more traffic.
I've been thinking about this actually.. Time to get it done.. Thanks John.
Oh wow! thx David for this great explanation! Ш'm just starting to research investing n was looking for roce and roi differences and voila!
Glad it was helpful!
refreshingly insightful and concise, thank you.
Glad it was helpful!
Thanks David for the explanation. I'm sure to buy your courses and learn more
Thanks Ra'id. See you around online.
Great video David, back on the grind...
Good to hear from you again Byron.
So which financial metric reflects best the potencial for a stock price to go up?
I'm not really a publicly-traded stock guy. All my content is within the small business world.
Hey David. After watching this, I would say if I like to invest in a stock, then ROCE is the most interesting number to me, because I see how much a Company made that also includes their debt. After seeing this good example from you, ROE could be very misleading, right? It does not take into Account the Debt or Borrowed money the Company used. ROCE does, right?
If you tried to maximize ROE, you could end up with an over-leveraged company. That can make it shaky if things go badly. Over the last decade, lots of private companies have used debt to finance share buy-backs. This is to increase ROE. We'll see how they do in this rising rate environment....
@@DavidCBarnett So ROCE takes of care of that right? Because it includes Debt or cost of Debt, right?
Nice explanation sir thank you
Thanks for watching. Glad to be able to help.
How much roe is normal then
Sorry, another 'it depends' answer. It can vary by industry and by what the owners want. ie, applying more leverage to boost ROE but it makes the business less stable.
Hey david nice video.Is there any difference between ROIC and ROCE?
ROIC or Return on Invested capital is used to figure out how much you'll make when buying a business. Some of the transaction databases I use refer to 'Market Value of Invested Capital' instead of 'selling price.'
@@DavidCBarnett So ROIC and ROI are the same things or not?
Hi,
Hi,
Didn’t get the point you referring the point to your franchise friend that its not 200k$, but its 800K$.
Can you pls specify how you come up to that?
The amount of money he invested in business was $800K. If you only consider the equity he put in, then you're not looking at return on investment, you're looking at return on equity.
If you buy an apartment block for $1M, then you invested a million dollars in real estate. It doesn't matter that you borrowed 900K of it, for example.
@@DavidCBarnett So, what you basically mean is that, in this same context, the guy invests 200K cash, and borrows the other 600K from the bank? And so the 200K is considered as equity while the 600K is considered as debt?
@@SportExtreme42 you got it.
Where is the ROCE?
It's the first one discussed.