ROCE disaggregates into the following components:
A)Profit Margin for ROCE Ratio x Inventory Turnover Ratio x Debt Ratio
B)Profit Margin for ROCE Ratio x Total Assets Turnover Ratio x Debt Ratio
C)Profit Margin for ROCE Ratio x Inventory Turnover Ratio x Capital Structure Leverage Ratio
D)Profit Margin for ROCE Ratio x Total Assets Turnover Ratio x Capital Structure Leverage Ratio
E)Profit Margin x Total Assets Turnover Ratio x Debt Ratio

Question

Quizplus · Accepted Answer

ROCE is the product of profit margin (Net Income/Sales) and asset turnover (Sales/Total Assets), multiplied by financial leverage (Total Assets/Equity). Therefore, the correct option is Profit Margin for ROCE Ratio x Total Assets Turnover Ratio x Capital Structure Leverage Ratio.

ROCE Disaggregates into the Following Components