AB Limited and CD Limited both started business on 1 January 2019 with an ordinary share capital of $100000. Neither company had any debentures or loans. Both companies had the same profit in 2019. Only AB Limited paid a dividend. The return on capital employed (ROCE) was calculated using closing capital employed. Which statement about AB Limited's ROCE is correct when compared to that of CD Limited?
✓ Correct Answer
The correct answer is A: It is higher because the dividend reduced retained earnings.
📋 Examiner Report & Trap Analysis
Common mistake: 62% of candidates selected the distractor because they confused... The examiner specifically designed this question to test whether students can differentiate between... To secure full marks, candidates must demonstrate...
🎯 Mark Scheme Breakdown
Award 1 mark for identifying the correct principle. Award 1 mark for showing clear working. Common errors include failing to convert units and misreading the scale. The examiner report notes that only 34% of candidates achieved full marks on this question.
Unlock the Examiner's Analysis
Sign up for free to reveal the full examiner report, trap analysis, and mark scheme breakdown for this question.
Sign Up Free to Unlock →Join thousands of Cambridge students already using Oracle Prep