Managers who want to manipulate accounts to make return on capital employed (ROCE)look more favorable are likely to take which of the following courses of action?
A) Find ways to reduce asset values
B) Find ways to boost profit and increase asset values
C) Find ways to increase asset values
D) Find ways to increase capital employed

Question

Quizplus · Accepted Answer

Managers who want to manipulate accounts to make ROCE look more favorable are likely to find ways to reduce asset values, such as by increasing depreciation charges or writing off assets early. This will lead to a lower capital employed figure, which will in turn increase ROCE. Option B implies a genuine increase in profit and asset values, which does not involve manipulating accounts. Option C is not correct as an increase in asset values will result in a higher capital employed figure, which will decrease ROCE. Similarly, option D is incorrect as an increase in capital employed will lower ROCE, all else being equal.

Managers Who Want to Manipulate Accounts to Make Return on Capital