Capturing Performance Improvement Opportunities
DEFINITIONS AND CALCULATIONS
CMD
R23
Return on Capital: RoC = net operating profit after tax / average invested capital
Net operating profit is defined as underlying operating profit after tax (where the tax charge reflects the group
tax charge after removing the estimated tax shield on net financing costs). Invested capital is defined as total
assets (excluding cash and cash equivalents and any surplus on post-retirement schemes) minus current liabilities
(excluding debt), with an average calculated as the difference between opening and closing balance sheets.
Total cash costs / Gross margin: TCC/GM = (self-funded R&D expenditure + C&A costs) / underlying gross profit
Self-funded research and development (R&D) expenditure excludes the impact of contributions (government
funding, amortisation and impairment of capitalised costs and amounts capitalised during the year) and fees.
Free Cash Flow is cash from operating activities including capital expenditure and movement in investments,
capital elements of lease payments, interest paid and excluding amounts spent or received on activity relating to
business acquisitions or disposals, financial penalties paid and exceptional restructuring payments.
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