Concluding Refinements of Methodology
“Returns on Corporate Capital”
thanks to all the invited experts who contributed views as well as
technology, we now have a final definition of “Returns on Corporate
Capital” (“ROCC”) that can be presented in easily understood form for free
public reference. The graphing tool, with a search input developed for our
requirements to find and present ROCC for any of the 5,700 "public companies"
currently subject to U.S. SEC reporting requirements, is now
posted on the Forum website
for your use.
final definition of “Methodology
for calculating ROCC has also been posted. The most significant
refinements from the June version are the calculation of returns based on
the same year’s asset and income data rather than prior period assets, and
a policy of reporting industry comparisons only if there are at least 4
companies to make the industry numbers meaningful. More detailed
explanations of these and other analytical decisions are presented in the
posted report, and any questions about the issues that were considered
will be welcomed.
should of course be understood that there are – and should
be – continuing debates about “the right way” to measure and compare the
returns companies generate from their use of capital. Our objective for
this project was simply to establish a metric that is (a) viewed by
professionals as an acceptably reasonable basis for analysis, (b)
consistently defined, so that different users can effectively compare and
test what others present, and (c) calculated from reliably sourced,
independently verifiable data.
never expected to develop a metric that everyone considered perfect, but I
believe that everyone who contributed to this project can be proud of a
best possible solution, and one that all of us can effectively present to
encourage investor focus on the essential use of corporate capital to
produce goods and services.
GL – October 20, 2017
Chairman, The Shareholder Forum
Madison Avenue, New York, New York 10022