C. George (Western) Ltd has recently produced its accounts for the current year. The board of directors
Question:
C. George (Western) Ltd has recently produced its accounts for the current year. The board of directors met to consider the accounts and, at this meeting, concern was expressed that the return on capital employed had decreased from 14 per cent last year to 12 per cent for the current year.
The following reasons were suggested as to why this reduction in ROCE had occurred:
(i) Increase in the gross profit margin.
(ii) Reduction in sales.
(iii) Increase in overhead expenses.
(iv) Increase in amount of stock held.
(v) Repayment of a loan at the year end.
(vi) Increase in the time taken for debtors to pay.
State, with reasons, which of the above might lead to a reduction in ROCE.
Step by Step Answer:
Accounting And Finance For Non Specialists
ISBN: 9780135717462
2nd Edition
Authors: Eddie McLaney, Peter Atrill