Level 4, Credit control Green light Return on capital employed

genesta

Return on Capital employed. All is clear, but no way I can get result as they have..
Please have a look and help me.
Formula: Net operat profit/ Total assets - current liabilities x 100
Sales 2,630
Purchases 1,830
Profit from operations 290
Total current assets 700
Inventory (included in total current assets) 340
Total current liabilities 460
Trade payables (included in total current liabilities) 420
Non-current liabilities 600
Equity 700

Theyr result 22.32%

How did they do?

sharpy92

Hello,

i always work out Return on capital employed as Operating profit / divided by Capital Employed (in this case would be Non-current liabilities 600 + equity 700 = 1300)

290/1300 * 100 = 22.31% - not sure why it's 1% out but it's definately the correct way to work it out.

Hope this helps!

genesta

Thank you very much!

I knew its simple and have done it before, but suddenly got confused about capital employed.. as found formula in web...

sharpy92

I remember it using the letters as I always forgets so ROCE = O for Operating Profit over your CE = Capital Employed.