9609 · 10.2.2
Practice and worked examples for 9609 Profitability ratios. Short previews only — attempt the full question in MarkScheme against the official scheme.
Revenue $1 000 000; gross profit $350 000; operating profit $120 000; capital employed $600 000.
Calculate GPM, OPM, and ROCE.
GPM = (350 000 ÷ 1 000 000) × 100 = 35%
OPM = (120 000 ÷ 1 000 000) × 100 = 12%
ROCE = (120 000 ÷ 600 000) × 100 = 20%
GPM fell from 40% to 35% while OPM fell from 15% to 10%. Suggest two possible causes.
GPM fall: higher cost of sales (material prices, inefficiency), price reductions to maintain volume, or shift to lower-margin products.
OPM fell further than GPM: overheads increased — e.g. higher admin wages, marketing spend, rent — eating into gross profit.
Use case evidence to pick the most likely cause.