Operating Profit Margin
Operating Profit Margin expresses the relationship between operating profit and sales revenue.
Operating Profit Margin % = Operating Profit/ Sales Revenue x 100
- This formula needs to be remembered for the exam, as it isn't on the formula sheet.
Question on Operating Profit
Dave's toy shop has a net profit of £545. Dave has a sales revenue of £1,390
Calculate Dave's Operating Profit for the year.
Return on Capital Employed
It measures how efficiently management is able to use the capital tied up in the business to generate profits.
ROCE % = Operating Profit / (Total Equity + Non-current Liabilities) x 100
- AQA may refer to AS Return On Capital Employed formula, so may need to be revised.
Question on ROCE
Dave's operating profit is £545. His Total Equity is £2,200 and his Non-current Liabilities of £1,053.
Calculate the Return on Capital Employed as a percentage.