ACCA PM · Chapter 13 · Question 7 of 11
A company's operating profit margin is 12% and its ROCE is 18%. Revenue is $3,000,000. What is the company's capital employed?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) $2,000,000
Explanation
ROCE = margin x asset turnover, so asset turnover = 18% / 12% = 1.5 times. Capital employed = revenue / asset turnover = $3,000,000 / 1.5 = $2,000,000. Check: operating profit = 12% x $3,000,000 = $360,000, and $360,000 / $2,000,000 = 18%.
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