ACCA Applied Knowledge · Management Accounting · Performance measurement - application
Division P of Tarn Co has operating profit of $240,000 and capital employed of $1,500,000. What is the division's return on investment (ROI)?
The ROI is 16%. Return on investment is divisional operating profit divided by capital employed, so $240,000 divided by $1,500,000 equals 0.16. Inverting the ratio or using the wrong figures would give an incorrect percentage.
- A16%Correct
- B6.25%
- C24%
- D1.6%
Explanation
ROI = operating profit / capital employed = 240,000 / 1,500,000 = 16%. The 6.25% option inverts the ratio (capital employed divided by profit, expressed in a different form). The 24% option uses an incorrect base.
Did you get it right without looking?
One question tells you little. A timed set on Performance measurement - application shows your real accuracy, how long you take and where you lose marks.
More Performance measurement - application questions
- Kestrel Ltd reported revenue of $800,000, cost of sales of $520,000 and operating expenses of $140,000. What is its operating profit margin?
- Division X has operating profit of $240,000 and capital employed of $1,200,000. The company's cost of capital is 15%. A new project would co…
- In the performance pyramid (Lynch and Cross), which pair is correctly identified as the top-level and the bottom-level aspects of the pyrami…
- A company uses the balanced scorecard. It measures 'percentage of customers who rate delivery as on time' and 'customer retention rate'. Whi…
- Division X of Brae Co has ROI of 20% and is considering a project costing $500,000 that would earn an annual profit of $90,000. The company'…
- A school's budget for the year was $1,200,000 for 800 pupils. Actual spending was $1,260,000 for 840 pupils, and the pass rate in national e…