View all ACCA F2 / FIA FMA lectures >> | This ACCA F2 / FIA FMA lecture is based on OpenTuition course notes, view or download here>> |

### Comments

### Leave a Reply

You must be logged in to post a comment.

OpenTuition.com Free resources for accountancy students

Free ACCA lectures and course notes | ACCA AAT FIA resources and forums | ACCA Global Community

Erica says

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?

johnmoffat says

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.

Erica says

RI should decrease or increase?

johnmoffat says

The RI will decrease

kimrong says

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 ?

johnmoffat says

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.

kimrong says

Ok …now i got it thx u very much for your clarification.

johnmoffat says

You are welcome

Fakhrul Iman says

Quite a good lecture. Thank u very much!

jackymunyi says

Who has an easy way to remember all those ratios??

sooner says

Thank you very much once again John Moffat.

Ps: thank for the correction – Rate of return

sooner says

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

thank you

johnmoffat says

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

IRR=12.5% ?

johnmoffat says

correct

fizzanaqvi says

Are these fomulas going to be provided in exams or do we have to learn them?

johnmoffat says

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.

lalithas says

Could you please with notes I am unable to down load the notes for the later chapters I am ok with the earlier ones

admin says

I don’t understand you

There is only one set of course notes

If you managed to download it

You have all the chapters

adnanaadi101 says

he speck very fast..