A business has capital employed of $200 000 and net profit of $36 000. What is the return on capital employed (ROCE)?
Question 1 Report
A business has capital employed of $200 000 and net profit of $36 000. What is the return on capital employed (ROCE)?
Answer Details
The correct answer is 18%.
Return on capital employed (ROCE) is calculated as:
ROCE = (Net profit / Capital employed) x 100
= ($36,000 / $200,000) x 100
= 18%
This means the business generates 18 cents of profit for every dollar of capital employed. 36% would incorrectly double the result or misplace the figures. 5.6% would result from dividing capital employed by net profit and confusing the ratio. 24% does not correspond to any valid calculation from these figures.
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