A high-speed rail operator has Capital Employed of $5,000,000. For the year, they generated Revenue of $12,500,000 and an Operating Profit of $2,500,000.

Calculate the Asset Turnover ratio. (Enter number only, e.g., 1.5)

How to approach this question

Asset Turnover = Revenue / Capital Employed.

Full Answer

Asset Turnover measures how efficiently a company uses its assets to generate sales. Formula: Revenue / Capital Employed Asset Turnover = $12,500,000 / $5,000,000 = 2.5 times. (Note: Operating profit is used for Profit Margin and ROCE, not Asset Turnover).

Common mistakes

Dividing Operating Profit by Capital Employed (which gives ROCE of 50%), or dividing Capital Employed by Revenue.

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Practice the full ACCA MA — Management Accounting Practice Exam 1

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