Disaggregating return on capital employed into sales margin and capital turnover offers a useful stating point for diagnosing firm performance.

Question

Quizplus · Accepted Answer

Disaggregating return on capital employed into its components can help identify whether a firm's profitability is due to a high sales margin, a high capital turnover, or a combination of both. This information can be useful for identifying areas where the firm could potentially improve its performance.

Disaggregating Return on Capital Employed into Sales Margin and Capital