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Rate of Return (ROR) - Return on Fixed Assets

We'll use the Carphone Warehouse's results to demonstrate these new ratios.
Consolidated Profit and Loss Account31 March 2001 25 March 2000
£'000£'000
Profit before interest and taxation45,01225,300
Total Fixed Assets396,175100,279
Net current assets (liabilities)93,180-2,660

Fill in this table and calculate the ratio values:

ROFA For the Carphone Warehouse
31 March 2001Profit before Interest and Tax
Fixed Assets
___________
= _____%
25 March 2000Profit before Interest and Tax
Fixed Assets
___________
= _____%

Did you get this?

A large difference between the results for the two years; 2001's performance was just less than half of 2000's result. We are assessing the efficiency of fixed assets and 25% is probably respectable. However, 11% is another matter and suggests a major change in efficiency between the two years.

Let's look at some other figures from the accounts that should help to explain what has happened to make this ratio fall so dramatically. The cost of sales has increased by 64% over the year and operating costs have increased by 37%; turnover has increased by 59% over the year

The Carphone Warehouse
Consolidated Profit and Loss Account
31 March 2001 25 March 2000
£'000£'000
Turnover1,110,678697,720
Cost of sales-830,126-505,738
Gross profit280,552191,982
Operating expenses-176,960-129,359
Operating profit66,01641,389
Other costs/income-21,004-16,089
Profit before interest and taxation45,01225,300

Source:
http://www.bized.co.uk/

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