What might a declining ROCE indicate about a business?

A declining Return on Capital Employed (ROCE) often signals potential issues with a company's ability to generate profit from its capital. When ROCE decreases, it can suggest that the business is utilizing its capital less efficiently, which negatively impacts operational efficiency. This could occur for various reasons, such as rising costs, reduced sales, or inefficiencies in production or service delivery.

In contrast, other options present scenarios that would typically lead to an improvement in ROCE rather than a decline. Increased profitability or efficient management of financial assets would be expected to result in a higher ROCE, indicating a well-performing company. Similarly, growing market share generally suggests a successful business which is likely to enhance profits, thus positively impacting ROCE. Therefore, a declining ROCE primarily points to decreased operational efficiency, indicating that the company may not be maximizing its resources effectively.