FCo had a profit of $100,000 before tax,after deducting $16,000 in interest expense.F Co's non-current liabilities and equity total $1,000,000.Return on capital employed,before interest and tax is:
A) 13%.
B) 11.6%.
C) 10%.
D) 9%.

Question

Quizplus · Accepted Answer

To calculate the return on capital employed before interest and tax, we need to divide the profit before interest and tax (PBIT) by the capital employed. 
PBIT = $100,000 + $16,000 (interest expense) = $116,000
Capital employed = non-current liabilities + equity = $1,000,000
Return on capital employed = PBIT/capital employed = $116,000/$1,000,000 = 0.116 or 11.6%

FCo Had a Profit of $100,000 Before Tax,after Deducting $16,000