Unlocking the Profitability: Calculate ROCE for Company X!

Can You Calculate the Return on Capital Employed (ROCE) for Company X?

1. What is the formula to calculate ROCE?

Final answer:

The Return on Capital Employed (ROCE) for Company X is 35%.

When we talk about a company's financial performance, one of the key metrics to consider is the Return on Capital Employed (ROCE). This ratio helps us understand how efficiently a company is using its capital to generate profits.

Explanation:

To calculate the Return on Capital Employed (ROCE), we use the formula:

ROCE = (Operating Profit / Capital Employed) * 100

First, let's calculate the Capital Employed:

  • Total Assets = Total Current Assets + Total Non-Current Assets
  • Total Liabilities = Total Current Liabilities + Total Non-Current Liabilities
  • Capital Employed = Total Assets - Total Liabilities

Using the financial data provided:

  • Total Assets = 200,000 + 300,000 = 500,000
  • Total Liabilities = 100,000 + 300,000 = 400,000
  • Capital Employed = 500,000 - 400,000 = 100,000

Now, let's plug the values into the ROCE formula:

  • ROCE = (Operating Profit / Capital Employed) * 100
  • ROCE = (35,000 / 100,000) * 100
  • ROCE = 35%

Therefore, the Return on Capital Employed (ROCE) for Company X is 35%, indicating that the company is generating a 35% return on the capital employed in its operations.

Understanding and analyzing metrics like ROCE can provide insights into the financial health and performance of a company. It allows investors and stakeholders to assess the efficiency and profitability of the business.

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