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Hi dear sir..please help me with the following question.
1. To calculate ARR, We uses average investment and average annual profits.
Average investment is calculated by taking intitial investment+scrap valur of any dividing it by 2.
If scrap value is not given then still we divide the intial investment by 2. Sir, average is the spreading of some amount over its numbers. Is it should not be 1 to calculate average of scrap value is not given?2. When calculating quick ratio’ we deduct inventory from current assets. Sir which stock we should deduct in exam? Opening stock, closing or average?
1. I don’t understand what you are asking. Either you are given the scrap value or there is no scrap value.
2. You use the current assets excluding inventory. So the inventory excluding is whatever is in the current assets!
For question#1 above i want to simply ask that if there is no scrap value then still we divide it by 2 which makes the intial invvestment half. Sir it wiil not be wrong? Why we divide it by 2?
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