OpenTuition | ACCA | CIMA
Free ACCA and CIMA on line courses | Free ACCA, CIMA, FIA Notes, Lectures, Tests and Forums
Spread the word
If you have benefited from our materials, please spread the word so more students can benefit.
To help us keep materials up to do and add new content you can also donate
June 10, 2020 at 2:24 pm
For ARR and payback period, Could we use the formula like
Cash inflow= profit + depreciation
By the way , I thought to ask this question in Ask to Tutor, but I couldn’t find it for FM.
John Moffat says
June 10, 2020 at 2:57 pm
ARR is calculated using the average profit, payback period is calculated using cash flows (which are the profits before depreciation).
There is an Ask the Tutor Forum for Paper FM. Click on the ‘forums’ tab and you will see it on the list!
June 10, 2020 at 11:10 am
In example 8, the net operating cash inflow is just a simple cash flow or it is net operating profit ?
Because for operating profit, we should not do depreciation.
June 10, 2020 at 2:59 pm
Cash flow means what it says – cash! That is not the same as the profit.
June 10, 2020 at 11:06 am
Is ARR and ROCE is same?
June 10, 2020 at 3:00 pm
ARR is calculated as a way of appraising an investment, and use the average expected profit.
ROCE is calculated for a company as a whole and is calculated at the end of each year (think back to Paper FA (was F3) or whatever exempted you from it).
April 26, 2020 at 12:39 pm
I didn’t get the point of average book value.
Book value formula = cost – depreciation
If I divide 62,500 by 2 in order to compute average of book value so the answer will be 31,250.
Just clear my concept through this process of average book value.
April 26, 2020 at 2:35 pm
To get the average during the year you add together the values at the start and end of the year, and then divide by 2.
May 1, 2020 at 11:50 am
got the point.
May 1, 2020 at 6:39 pm
You are welcome 🙂
August 1, 2019 at 11:37 am
Am cool with these approaches. Thank you sir
February 12, 2020 at 6:56 am
Thank you for your comment 🙂
April 19, 2019 at 12:45 pm
Hi John, the average profit divided over 4 while average book value divided only over 2. shouldn’t be also over the useful life of the asset ?
April 19, 2019 at 3:27 pm
No. The average book value of the asset is the average of the value at the start and the value at the end – we add them together and divide by 2.
Do watch the lecture again, because I do explain the reasoning.
March 14, 2019 at 9:10 am
To calculate an average of two numbers, you add them together and divide by 2.
If the scrap value had been zero, then the average value would have been 80,000/2 = 40,000.
The value at the end is more than zero, and so the average value is higher than 40,000.
March 17, 2019 at 3:52 pm
March 14, 2019 at 5:59 am
Hi sir, Sorry but I don’t understand the portion related to the average book value in example 8.
If the machine costs $80 000 and $10 000 scrap value. Why do you minus the $10 000? In the example you had added on the $10 000. I’m a little confused on that portion.
Thank you in advance for your help!
February 11, 2020 at 10:34 pm
You must be logged in to post a comment.