AB Limited and CD Limited each began trading on 1 January 2019 with ordinary share capital of $100\,000. Neither firm had any debentures or loans. The two companies made the same profit in 2019. A dividend was paid only by AB Limited. Return on capital employed (ROCE) was worked out by using closing capital employed. Which statement correctly describes AB Limited’s ROCE in comparison with that of CD Limited?
- AIt is higher because the dividend reduced retained earnings.
- BIt is lower because the dividend reduced capital employed.
- CIt is lower because the dividend reduced the profit for the year.
- DIt is the same as that of CD Limited.