Question 1

Section A

A company has Revenue of $800,000, Gross Profit of $300,000, and Operating Profit of $120,000. Total Assets are $650,000 and Current Liabilities are $150,000.

Calculate the Asset Turnover ratio. (Enter the number only, rounded to one decimal place, e.g., 1.5)

Accepted Answer

Asset Turnover = Revenue / Capital Employed. Capital Employed = Total Assets - Current Liabilities.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Using Gross Profit or Operating Profit instead of Revenue, or using Total Assets without deducting Current Liabilities.

Section A

A company has Revenue of $800,000, Gross Profit of $300,000, and Operating Profit of $120,000. Total Assets are $650,000 and Current Liabilities are $150,000.

Calculate the Asset Turnover ratio. (Enter the number only, rounded to one decimal place, e.g., 1.5)

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FA — Financial Accounting Practice Exam 5

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