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February 24, 2016 at 2:27 pm
Most books give this formula like as Long-term debt/ Capital employed
but you only divided the Long term debt by Equity? why didnt you add long term debt to equity?
John Moffat says
February 24, 2016 at 10:48 pm
Sorry but most books give (or should certainly give) two measures of gearing – the ratio of debt to equity, or the ratio of debt to equity plus debt.
Because both are standard ways of measuring gearing, the examiner always makes it clear which of the two he is requiring in a question.
December 9, 2015 at 6:30 am
Sir are these formulas given in the exam?
December 9, 2015 at 6:49 am
No – you can see what is on the formula sheet by looking at the page in the free Lecture Notes.
November 30, 2015 at 5:23 am
as you say in calculating the Receivables/Payable days the most accurate way to take an average of them.so why not we doing this in above example although we’ve closing Receivable/Payable for 2007 as well as closing balances for last year 2006 which become the opening balance for this year.
November 30, 2015 at 6:57 am
But then how could you fairly compare with 2006, when you do not have the opening balance for 2006?
There is no rule – in practice you do whatever you think is more sensible.
In the exam we normally use end of year figures.
October 25, 2015 at 1:20 am
Are chapters 24, 25 and 26 related to the previous chapters or can we watch them without having seen the previous few chapters???
October 25, 2015 at 7:48 am
I suppose that you can go through them without looking at the previous chapters first.
However it makes more sense to go through all the chapters in number order – they are arranged so as to be a complete course for Paper F2.
November 21, 2014 at 5:55 pm
Please dear Sir:
I dont understand the difference between: RETURN ON CAPITAL EMPLOYED and R.O.C.E : isn´t it the same? because you measure the ROCE as assets turnover x net profi margin.
November 22, 2014 at 9:53 am
Yes it is the same.
It is not measured as asset turnover x net profit margin. It is measured as profit before interest and tax (net operating profit) as a percentage of capital employed. It is equal to asset turnover x net profit margin, but that is not how it is measured!
July 24, 2014 at 11:37 am
Sir, help me.
An investment division earns a return on investment of 15% and a residual income of $200,000. The cost of capital is 18%. A new project gives a return on capital employed of 16%. If the new project is accepted, what will happen to the division’s return of investment and residual income?
Why does the return on investment and the residual income increases?
July 24, 2014 at 1:19 pm
ROI increases because project gives 16% which is more than the current 15%.
RI decreases because the project return is less than the cost of capital.
Why have you posted this question beneath this lecture??? The question is on divisional performance.
Please ask questions in the F2 Ask the Tutor Forum – not as a comment on a lecture.
July 24, 2014 at 1:27 pm
RI should decrease or increase?
July 24, 2014 at 1:31 pm
The RI will decrease
May 8, 2014 at 7:02 am
Hello …can u help me clarify the asset turnover formula?
1_ asset turnover: sale/ nca
Or 2_ asset turnover: sale/total asset
Or 3_asset turnover: sale/capital employed ?
4_asset turnover: turnover/capital employed.
Which of this above should we use in the exam ?
May 8, 2014 at 7:40 am
Usually, asset turnover is sales/total capital employed.
Turnover and sales are the same thing.
Capital employed = equity + non-current liabilities (which is always equal to (total assets – current liabilities))
It can be looked at in more detail by calculating sales/non-current assets. However only do this if the question specifically asks for it. Otherwise calculate as per my first line.
May 8, 2014 at 8:47 am
Ok …now i got it thx u very much for your clarification.
May 8, 2014 at 8:48 am
You are welcome 🙂
Fakhrul Iman says
April 5, 2014 at 3:31 am
Quite a good lecture. Thank u very much! 🙂
December 9, 2013 at 1:57 pm
Who has an easy way to remember all those ratios??
November 13, 2013 at 1:00 am
Thank you very much once again John Moffat.
Ps: thank for the correction – Rate of return
November 12, 2013 at 12:49 am
Good night john moffat,
Can u please help me with this question. u might need to walk me through it.
Using an interest rate of 10% per year , the net present value (NPV) of a project has been correctly calculated as $50.00.
If the interest rate is increased by 1% the npv of the project falls by $20.00
What is the internal rate of interest of the project
November 12, 2013 at 5:55 am
For the internal rate of return (not internal rate of interest) we want the NPV to be zero.
At 10% the NPV is 50. Since it falls by 20 for every 1% increase in interest, we need 10% to increase by 50/20 x 1%
abhinandh dileep says
December 8, 2013 at 5:18 pm
December 8, 2013 at 8:06 pm
August 3, 2013 at 2:18 am
Are these fomulas going to be provided in exams or do we have to learn them?
August 3, 2013 at 10:06 am
The formula sheet printed at the front of our notes is the sheet that you are given in the exam.
You are not given any other formulae.
July 23, 2013 at 5:39 pm
Could you please with notes I am unable to down load the notes for the later chapters I am ok with the earlier ones
July 24, 2013 at 8:40 am
I don’t understand you
There is only one set of course notes
If you managed to download it
You have all the chapters
December 7, 2012 at 6:29 pm
he speck very fast.. 🙁
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