ACCA FA · Chapter 14 · Question 4 of 10
A company has profit before interest and tax of $90,000, equity of $400,000 and 9% loan notes (non-current) of $200,000. What is its return on capital employed (ROCE)?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) 15%
Explanation
Capital employed = equity + non-current liabilities = $400,000 + $200,000 = $600,000. ROCE = profit before interest and tax / capital employed = $90,000 / $600,000 = 15%. Using equity only gives 22.5%, and using profit after interest ($90,000 - $18,000 = $72,000) gives 12%.
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