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ACCA · Question 35 · Syllabus F: Performance measurement
A high-speed rail operator has Capital Employed of $5,000,000. For the year, they generated Revenue of $12,500,000 and an Operating Profit of $2,500,000.
Calculate the Asset Turnover ratio. (Enter number only, e.g., 1.5)
A high-speed rail operator has Capital Employed of $5,000,000. For the year, they generated Revenue of $12,500,000 and an Operating Profit of $2,500,000.
Calculate the Asset Turnover ratio. (Enter number only, e.g., 1.5)
How to approach this question
Asset Turnover = Revenue / Capital Employed.
Full Answer
Asset Turnover measures how efficiently a company uses its assets to generate sales.
Formula: Revenue / Capital Employed
Asset Turnover = $12,500,000 / $5,000,000 = 2.5 times.
(Note: Operating profit is used for Profit Margin and ROCE, not Asset Turnover).
Common mistakes
Dividing Operating Profit by Capital Employed (which gives ROCE of 50%), or dividing Capital Employed by Revenue.
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