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Objectives

Breakdown of ROCE

Return on capital employed (ROCE)

= (Operating profit/Capital Employed) × 100%

Operating profit margin = × Asset turnover =

(Operating profit/Revenue) × 100% Revenue/Capital Employed

This breakdown of ROCE will enable you to identify whether changes
are caused by changes in the level of revenue generated from the
entity’s asset base (asset turnover), or by a change in profit margin, or a
combination of the two.

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