The ratio which is considered to be the primary measure of overall profitability as it assesses how effectively the business has used its funds is:
A) return on ordinary shareholders' funds.
B) gross profit margin.
C) return on capital employed.
D) operating profit margin.

Question

Quizplus · Accepted Answer

Return on capital employed (ROCE) is considered to be the best measure of overall profitability because it takes into account both the profits generated by a company and the capital invested in the business. ROCE indicates how efficiently a company has used its capital to generate profits. It is calculated by dividing earnings before interest and tax (EBIT) by the capital employed (total assets minus current liabilities). The higher the ROCE, the better the company has used its funds.

The Ratio Which Is Considered to Be the Primary Measure