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.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question
Question Posted: