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December 1, 2019 at 4:25 pm
There are many different formulas to calculate ROCE, are the two in the notes sufficient for the exam?
October 2, 2019 at 7:42 am
John Moffat says
October 1, 2019 at 8:26 am
Profit before tax is after subtracting interest paid. Profit before interest and tax is before subtracting interest paid.
October 1, 2019 at 8:59 am
ohh sorry sir. actually i wanted to know why we had chosen operating profit instead of profit before taxation in Return on Capital Employed. i kind of forgot finance costs are also known as interests. my bad!
October 1, 2019 at 3:16 pm
It is because we are trying to measure how well the business is actually performing. We take the operating profit before interest (because how much interest we pay depends on where we got the money from the finance the operations) and also before tax (because we do not control the rate of tax that the government charges).
October 1, 2019 at 8:41 pm
thank you sir!
October 2, 2019 at 8:16 am
You are welcome 🙂
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