ACCA FA · Chapter 14 · Question 9 of 10
A company has revenue of $750,000, capital employed of $500,000 and an operating profit margin of 12%. What is its return on capital employed?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) 18%
Explanation
ROCE = operating profit margin x asset turnover. Asset turnover = $750,000 / $500,000 = 1.5 times. ROCE = 12% x 1.5 = 18%. Check: operating profit = 12% x $750,000 = $90,000, and $90,000 / $500,000 = 18%. Dividing the margin by asset turnover gives 8%.
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