ExpertEasy2 marksShort Answer
ACCA · Question 34 · F. Performance measurement
A national delivery fleet reported annual revenue of $5,000,000. The company's operating profit was $500,000, and its total Capital Employed was $2,000,000.
Calculate the Asset Turnover ratio for the year.
(Enter the numeric value only, up to one decimal place, without text)
A national delivery fleet reported annual revenue of $5,000,000. The company's operating profit was $500,000, and its total Capital Employed was $2,000,000.
Calculate the Asset Turnover ratio for the year.
(Enter the numeric value only, up to one decimal place, without text)
How to approach this question
Divide Revenue by Capital Employed. Ignore the operating profit, as that is used for ROI or profit margin.
Full Answer
Asset Turnover measures how efficiently a company uses its assets to generate sales.
Formula: Revenue / Capital Employed.
$5,000,000 / $2,000,000 = 2.5 times.
Common mistakes
Calculating ROI ($500k / $2m = 25%) or Profit Margin ($500k / $5m = 10%) instead of Asset Turnover.
Practice the full ACCA MA — Management Accounting Practice Exam 5
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