What do you multiply to find Return on Capital Employed if using the profit margin formula?

Return on Capital Employed (ROCE) is a key performance metric that assesses the efficiency of a company's use of its capital to generate profits. The formula for ROCE can be derived through the understanding of profit margin and asset turnover.

To calculate ROCE using the profit margin formula, you first need to understand both components involved: profit margin and asset turnover. The profit margin tells you how much profit a company makes for every unit of sales. Asset turnover measures how efficiently a company uses its assets to generate sales.

When you multiply the profit margin by the asset turnover, you obtain the overall return on capital employed. This is because you are essentially calculating how many units of profit you generate relative to the capital tied up in generating those sales. This multiplication gives you a more comprehensive understanding of a company's operational efficiency in generating returns on the capital invested.

Therefore, multiplying the profit margin by the asset turnover directly leads to the calculation of ROCE, as it incorporates both the profitability and the efficiency of asset use in generating sales and profits. This is why the chosen answer is the most accurate for determining Return on Capital Employed using the profit margin formula.