Return on Capital Employed (ROCE) using average capital Steps:

• Opening retained earnings: $250,000 -$95,000 = $155,000
• Opening capital employed: $400,000 (shares) +$155,000 + $100,000 (debenture) =$655,000
• Closing capital employed: $400,000 +$250,000 + $100,000 =$750,000
• Average capital employed: ($655,000 +$750,000) / 2 = $702,500
• ROCE: ($95,000 /$702,500) × 100% = 13.6% Why D is correct:
• ROCE formula uses net profit divided by average capital employed (share capital + retained earnings + long-term debt), yielding 13.6% Why the others are wrong:
• A: Uses closing capital employed ($750,000), giving 12.7%
• B: Incorrect division, e.g., profit over overstated capital like $791,000
• C: Minor arithmetic error in averaging, e.g., using $727,000 capital Final answer: D