ExpertMedium2 marksMultiple Choice
ACCA · Question 35 · Performance measurement
From the following data, calculate the Return on Capital Employed (ROCE):
Operating Profit (PBIT): $150,000
Interest: $20,000
Tax: $30,000
Total Assets: $1,200,000
Current Liabilities: $200,000
From the following data, calculate the Return on Capital Employed (ROCE):
Operating Profit (PBIT): $150,000
Interest: $20,000
Tax: $30,000
Total Assets: $1,200,000
Current Liabilities: $200,000
Answer options:
A.
12.5%
B.
10%
C.
15%
D.
13%
How to approach this question
ROCE = Profit Before Interest and Tax (PBIT) / Capital Employed. Capital Employed = Total Assets - Current Liabilities.
Full Answer
C.15%✓ Correct
Capital Employed = Total Assets ($1,200,000) - Current Liabilities ($200,000) = $1,000,000.
ROCE = PBIT ($150,000) / Capital Employed ($1,000,000) = 0.15 or 15%.
Common mistakes
Using Profit After Tax instead of PBIT, or failing to deduct Current Liabilities from Total Assets.
Practice the full ACCA MA — Management Accounting Practice Exam 2
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