ExpertMedium2 marksShort Answer
ACCA · Question 34 · Interpretation of financial statements
A company has an Operating Profit (Profit before interest and tax) of $150,000. Its Total Assets are $1,200,000 and Current Liabilities are $200,000. What is the Return on Capital Employed (ROCE) percentage? (Enter number only, round to 1 decimal place)
A company has an Operating Profit (Profit before interest and tax) of $150,000. Its Total Assets are $1,200,000 and Current Liabilities are $200,000. What is the Return on Capital Employed (ROCE) percentage? (Enter number only, round to 1 decimal place)
How to approach this question
Calculate Capital Employed (Total Assets - Current Liabilities). Then divide Operating Profit by Capital Employed and multiply by 100.
Full Answer
Capital Employed = Total Assets ($1,200,000) - Current Liabilities ($200,000) = $1,000,000. ROCE = (Operating Profit / Capital Employed) * 100 = ($150,000 / $1,000,000) * 100 = 15%.
Common mistakes
Using Profit after tax instead of Operating Profit, or failing to deduct current liabilities from total assets.
Practice the full ACCA FA — Financial Accounting Practice Exam 2
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