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sir,
When calculating PBIT to find ROCE.What are the interest expenses that we should INCLUDE in Profit before tax to get PBIT.
EG:
operating profit:$2000000Finance costs
1.loan $300000
2.overdraft $10000
3.lease $290000
profit before tax:$1400000so what is the PBIT?
ANS:PBIT=$1990
note:for the purpose of calculating ROCE and gearing,all finance obligations are treated as long term interest gearing borrowings.I am not sure what you are asking because you seem to have answered your own question 🙂
PBIT is profit before interest and tax, so you need to add back to the profit before tax all the interest on long-term borrowings (i.e. the loan and the lease (because lease payments are treated the same way as interest on long-term borrowings).
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