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Hi mike,
I am a bit confused with a question i juat solved in bpp.
Where there was acquisition and we are to calculate roce without d company acquired. They deducted 25% tax from the profit before tax before deducting it from the groups net asset.
1 how did they get the percentage for tax
2 why are they deducting tax from profit before tax when we are suppose to use profit before interest and tax.Plesae help me out
Thanks‘1 how did they get the percentage for tax’
You haven’t told me either the name of the question nor even the page number
Not even what book you are looking at – study text or revision kit
But that’s ok because I don’t possess any BPP material so am unable to look at the question anyway!
I imagine that somewhere, maybe hidden, within the question you will find reference to 25% tax rate
‘2 why are they deducting tax from profit before tax when we are suppose to use profit before interest and tax’
If you’re looking at any ratio that involves profits, retained earnings or shareholders’ funds we need to deduct the tax on this year’s profits
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