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Joel Greenblatt defined Return on Capital differently in his book The Little Book That Still Beats the Market (Little Books. Big Profits). He defines Return on Capital as EBIT divided by the total of net fixed assets and net working capital. Banco Santander SA's annualized return on capital (Joel Greenblatt) for the quarter that ended in Dec. 2013 was 48.00%.
During the past 13 years, Banco Santander SA's highest Return on Capital (Joel Greenblatt) was 118.14%. The lowest was 4.83%. And the median was 51.48%.
Banco Santander SA's 3-Year average Growth Rate of Return on Capital (Joel Greenblatt) was 0.00% per year.
Joel Greenblatt defined Return on Capital differently in his book The Little Book That Still Beats the Market (Little Books. Big Profits) . He defines Return on Capital as follows:
|Return on Capital||=||EBIT||/||(Net fixed Assets||+||Net Working Capital)|
EBIT stands for Earnings Before Interest and Taxes. It is also called operating income.
Fixed Assets are also known as non-current assets. They include the property, plant, and equipment that the firm needs in its operation.
GuruFocus calculates net working capital as: (Accounts Receivable + Inventory + Other Current Assets) - (Accounts Payable + Other Current Liabilities). We're trying to account for OPERATING assets and liabilities (part of daily business) when calculating working capital. Cash and marketable securities are considered NON-OPERATING assets and are not included in calculation. We will also back out all interest bearing debt, short term debt and the portion of long term debt that is due in the current period from the current liabilities. This debt will be considered when computing cost of capital and it would be inappropriate to count it twice.
|Working Capital||(Q: Dec. 2013 )|
|=||(Accounts Receivable||+||Inventory||+||Other Current Assets)||-||(Accounts Payable||+||Other Current Liabilities)|
When net working capital is negative, 0 is used.
So Joel Greenblatts Return on Capital of Banco Santander SA for the quarter that ended in Dec. 2013 can be restated as:
|Return on Capital (Joel Greenblatts)||(Q: Dec. 2013 )|
|=||EBIT||/||(Net fixed Assets||+||Net Working Capital)|
|=||Operating Income||/||(Net Property, Plant and Equipment||+||Net Working Capital)|
Note: The Operating Income data used here is four times the quarterly (Dec. 2013) operating income data.
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
The way Joel Greenblatt defines Return on Capital is a more accurate measure of how efficiently the company generates returns onthe capital actually invested in the business. EBIT is used instead of net income because the tax and interest payment may be affected by factors other than the core business operation. Intangible assets are not included in the calculation because they dont need to be replaced.
Joel Greenblatt uses his definition of Return on Capital and Earnings Yield (Joel Greenblatt) to rank companies.
Banco Santander SA Annual Data
Banco Santander SA Quarterly Data