ExpertMedium2 marksShort Answer
ACCA · Question 09 · Interpretation of Financial Statements
Section A
TransGlobal Logistics has the following financial data for the year:
Operating profit (Profit before interest and tax): $450,000
Finance costs: $50,000
Tax expense: $80,000
Total Equity: $1,200,000
Non-current liabilities: $800,000
Current liabilities: $300,000
Calculate the Return on Capital Employed (ROCE) as a percentage. (Enter the number only, rounded to one decimal place, e.g., 15.5)
Section A
TransGlobal Logistics has the following financial data for the year:
Operating profit (Profit before interest and tax): $450,000
Finance costs: $50,000
Tax expense: $80,000
Total Equity: $1,200,000
Non-current liabilities: $800,000
Current liabilities: $300,000
Calculate the Return on Capital Employed (ROCE) as a percentage. (Enter the number only, rounded to one decimal place, e.g., 15.5)
How to approach this question
ROCE = (Operating Profit / Capital Employed) × 100. Capital Employed = Total Equity + Non-current liabilities.
Full Answer
Operating Profit (PBIT) = $450,000.
Capital Employed = Total Equity ($1,200,000) + Non-current liabilities ($800,000) = $2,000,000.
ROCE = ($450,000 / $2,000,000) × 100 = 22.5%.
Common mistakes
Using Profit after tax instead of Operating Profit, or including current liabilities in Capital Employed.
Practice the full ACCA FA — Financial Accounting Practice Exam 5
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