Upwards revaluation increases non-current assets, lowering efficiency and profitability ratios

Steps:

• Non-current asset turnover = sales revenue / average non-current assets; upwards revaluation raises non-current assets (denominator), decreasing the ratio.
• Return on capital employed (ROCE) = operating profit / capital employed; capital employed includes revalued non-current assets, increasing the denominator and decreasing ROCE.
• Draft statements pre-revaluation show original asset values; post-revaluation comparison reveals ratio declines.
• Sales and profit remain unchanged by revaluation, isolating asset base impact.

Why A is correct:

• Both ratios use asset-heavy denominators; revaluation increases these without numerator changes, per standard ratio formulas, causing decreases.

Why the others are wrong:

• B: Turnover decreases, not increases, due to higher assets.
• C: ROCE decreases, not increases, from larger capital employed.
• D: Neither ratio increases; both decline from elevated denominators.

Final answer: A