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Dear Mike, thank you for your help, now i have a another question, How can ROCE be further analysed into its component ratios?
A Gross profit margin / net asset turnover
B Gross profit margin x net asset turnover
C Net profit margin / net asset turnover
D Net profit margin x net asset turnover
the answer is C
would you please explain to me?
many thanks
jingdongyuIf profit margin is:
Pbit / Revenue x 100
And asset / turnover is:
Revenue / Capital employed
The ROCE is:
Pbit / Capital employed and that’s the same as:
Profit margin / Capital employed
Does that answer it?
Thank you for your help, the answer which BBP gave to me is C, Net profit margin/ net asset turnover, i am very confused, because Net profit margin x net asset turnover= PBIT/Capital employed.
do you think the answer which BPP gave is wrong, would you please help me.
many thanksMy mistake – I’ve typed “/” instead of “*”, but if you’d followed my response you would have realised that it should have been multiplied!
Where I have typed
“Profit margin / Capital employed” I should have typed
“Profit margin * Capital employed”Is that better?
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