Return on capital employed compares
A)Profit before long term interest & tax / total assets
B)Profit before long term interest & tax / total net assets
C)Profit before tax / total assets
D)Profit before tax / total net assets

Question

Quizplus · Accepted Answer

Return on capital employed (ROCE) measures the return generated by a company's total net assets. It is calculated by dividing profit before long-term interest and tax by the total net assets. Therefore, option B is the best choice as it includes net assets and not just total assets. Options A and C do not include the deduction of interest expenses, which can significantly impact a company's profitability. Option D divides profit before tax by total net assets which is incorrect as it does not account for interest expenses.

Return on Capital Employed Compares