Question 1

A national delivery fleet reported annual revenue of $5,000,000. The company's operating profit was $500,000, and its total Capital Employed was $2,000,000.

Calculate the Asset Turnover ratio for the year.

(Enter the numeric value only, up to one decimal place, without text)

Accepted Answer

Divide Revenue by Capital Employed. Ignore the operating profit, as that is used for ROI or profit margin.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Calculating ROI ($500k / $2m = 25%) or Profit Margin ($500k / $5m = 10%) instead of Asset Turnover.

A national delivery fleet reported annual revenue of $5,000,000. The company's operating profit was $500,000, and its total Capital Employed was $2,000,000.

Calculate the Asset Turnover ratio for the year.

(Enter the numeric value only, up to one decimal place, without text)

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA MA — Management Accounting Practice Exam 5

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