ACCA FR · Chapter 14 · Question 15 of 15
Bushbuck Co has revenue of $4,000,000, profit before interest and tax of $600,000 and capital employed of $2,500,000. Which of the following correctly shows its operating profit margin, asset turnover and ROCE?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Margin 15%; asset turnover 1.6 times; ROCE 24%
Explanation
Operating profit margin = $600,000 / $4,000,000 = 15%. Asset turnover = revenue / capital employed = $4,000,000 / $2,500,000 = 1.6 times. ROCE = $600,000 / $2,500,000 = 24%. As a check, ROCE = margin x asset turnover = 15% x 1.6 = 24%.
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