ACCA FR · Chapter 14 · Question 9 of 15
Gerenuk Co has profit before interest and tax of $360,000, total equity of $1,500,000 and a long-term loan of $500,000. What is its return on capital employed (ROCE)?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) 18%
Explanation
ROCE = profit before interest and tax / capital employed, where capital employed = equity + non-current liabilities (interest-bearing debt). ROCE = $360,000 / ($1,500,000 + $500,000) = $360,000 / $2,000,000 = 18%.
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