Comments

  1. avatar says

    Hi,

    Normally in P&L statement we have different type of profits as example we have
    1) gross profit (EBITDA) earning before depreciation and amortization, interest and taxes
    2) Operating profit earning before interest and tax (EBIT)
    3) Earning before tax (EBT)
    4) Net profit Earning after interest and tax (EAIT)

    My question is when calculating ROI which type of profit should we use? Is the profit used in this calculation is vary when we do it for investment center and other division such as profit center?

    • avatar says

      When calculating ROI…we first need to consider the controllable Operating profit and then the non controllable operating profit.So the most important is the operational profit and controllable factors that the divisional manager is responsible for.

  2. avatar says

    Hi Sir, in the notes, for ROI it says Profit divided by investment multiply by 100%. I was working a past paper and in the answer sheet, the took net profit divided by net assets multiply by 100%, which way should be do it sir? Thank you :)

  3. Profile photo of hamzaharoon says

    Dear Sir John.

    I already passed F5 in june 2013 and I still remember this topic, however as now I am going for F7 next week this topic is still present in F7 as interpretation ratio analysis, please tell me is this lecture still compatible with F7? I didn’t find many differences, please Advice and many thanks in advance!

      • Profile photo of hamzaharoon says

        I already asked Sir Mike about this but Unfortunately he is not replying, more then a day is passed I wrote the question in forum and time is running short as paper is on Tuesday that’s why I asked you, may be he is very busy that is why he is still not replying…………..anyways thanks for your response sir and yep both f5 and f7 ratios are same with f7 have some more ratios.

    • Profile photo of aitezazshah says

      whn divisional manager takes decisions which are good for division itself and also good for the overall company this is called goal congruent,,,,,the issue arises when a company is divisionalised and each divisional manager having the power of decision making so sumtimes the decisions of a divisional manager is in the best interest of his/her division but not good for company overall in long run.(known as
      dysfunctional decisions)

  4. Profile photo of hamzaharoon says

    To Tell you honestly, I Studied RI and ROI in F2 on my own from BPP book and I swear I didn;t understood a thing about them, It was before I found Open tuition, But today in the whole of this lecture I think I completely not only understood it, But now feeling very confident that I can write much about it in exam, This whole lecture is so beautifully explained that it will be impossible for someone to still didn’t understand RI and ROI

    Thank you so much Respected Sir John this is incredibly one of the best lectures

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