ACCA Applied Knowledge · Management Accounting · Performance measurement - application
Division P of Orbit Co has divisional profit before interest and tax of $180,000 and capital employed of $1,200,000. What is the division's return on investment (ROI)?
ROI is divisional profit divided by capital employed. Here $180,000 divided by $1,200,000 gives 15%. Other figures arise from inverting the ratio or using wrong values, so 15% is the only result that follows from the data given.
- A15%Correct
- B6.7%
- C18%
- D12%
Explanation
ROI = profit / capital employed = 180,000 / 1,200,000 = 15%. The 6.7% option inverts the ratio (capital over profit logic). The 18% and 12% options use incorrect bases.
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