ExpertMedium2 marksShort Answer
ACCA · Question 31 · Syllabus F: Performance measurement
A cybersecurity firm reports the following financial data for the year:
- Operating Profit (PBIT): $450,000
- Interest expense: $50,000
- Tax expense: $80,000
- Total Assets: $3,000,000
- Current Liabilities: $500,000
Calculate the Return on Capital Employed (ROCE) as a percentage. (Enter number only, do not include the % sign)
A cybersecurity firm reports the following financial data for the year:
- Operating Profit (PBIT): $450,000
- Interest expense: $50,000
- Tax expense: $80,000
- Total Assets: $3,000,000
- Current Liabilities: $500,000
Calculate the Return on Capital Employed (ROCE) as a percentage. (Enter number only, do not include the % sign)
How to approach this question
ROCE = PBIT / Capital Employed. Capital Employed = Total Assets - Current Liabilities.
Full Answer
ROCE = Profit Before Interest and Tax (PBIT) / Capital Employed
Capital Employed = Total Assets - Current Liabilities = $3,000,000 - $500,000 = $2,500,000.
PBIT = $450,000.
ROCE = ($450,000 / $2,500,000) × 100 = 18%.
Common mistakes
Using Net Profit (after interest and tax) instead of PBIT, or using Total Assets instead of Capital Employed.
Practice the full ACCA MA — Management Accounting Practice Exam 1
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