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Could you please clarify, in calculatoon of ROI and RI,if it’s offered for company to acquire asset that has certain depreciation level, should we deduct it from profit the first year or starting from subsequent year?In my kit it’s shown differently.
Thanks.I am guessing that what you really mean is whether in the calculations we use the SOFP values at the beginning of the year (so before this years depreciation) or the values at the end of the year (so after this years depreciation).
There is no rule about this in real life – it is up to the company to decide how to do the measures. More sensible is usually to use the values at the start of the year on the basis that it is the assets at the start of the year that will have earned the profits for the year.
In the exam it is usually made clear which figures to use. If it is not made clear then you would get credit for using either.
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