CIMA BA3 · Chapter 13 · Question 9 of 10
A company has revenue of $500,000, capital employed of $250,000 and an operating profit margin (profit before interest and tax / revenue) of 8%. What is its return on capital employed?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) 16%
Explanation
Asset turnover = revenue / capital employed = $500,000 / $250,000 = 2 times. ROCE = operating profit margin x asset turnover = 8% x 2 = 16%. Check: profit before interest and tax = 8% x $500,000 = $40,000; $40,000 / $250,000 = 16%.
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