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August 14, 2020 at 4:11 pm
Sir.., I am confusing about Q3. ROCE
ROCE = Profit before interest and tax/ Capital Employed
PBIT/CE = Asset Turnover X GP Margin
PBIT/CE = Sale/ CE X Gross profit (PBIT)/ Sale
So.. should use gross profit right..?
please kindly let me know why use net profit margin. Thank so much in advance
John Moffat says
August 15, 2020 at 8:04 am
The net profit for management purposes is the profit before interest and tax. I explain why this is the case in my free lectures on this.
May 6, 2020 at 7:42 am
Sir, there is two gearing ratio. 1. debt/EQUITY. 2.DEBT/DEBT+EQUITY,
How we know which ratio is required in question, as in question 4 the first ratio is required.
May 6, 2020 at 7:55 am
Question 4 does not require the first ratio. If there is more debt then the gearing will always increase whichever of the two measures is used.
If in the exam you are required to actually calculate the ratio then the question will make it clear which way it is to be measured.
May 8, 2020 at 6:51 pm
THANK YOU SIR.
March 31, 2020 at 1:39 am
Sir, may I ask what does it meant by written off inventory?I was quite confused about that.
Thanks in advance.
March 31, 2020 at 8:02 am
Writing off inventory is reducing its value to zero (presumably because it was no longer fit to be sold).
November 12, 2019 at 8:47 am
Do we get these ratios on a formula sheet during the exam?
February 14, 2020 at 2:28 pm
February 14, 2020 at 2:33 pm
No you don’t. The formulae that you are given in the exam are on the formula sheet that is printed near the front of our free lecture notes.
August 22, 2019 at 8:09 pm
sir i have a confusion. as gearing is also measured by the formula Total assets-current liabilities. in Qs 5 as we write of inventory it results in decrease of total assets so gearing should decrease…then why is the correct answer increasing ?
August 23, 2019 at 9:35 am
Gearing is not measured as total assets minus current liabilities!!
It is measured as long-term debt divided by equity plus long-term debt. Equity plus long-term debt is equal to total assets less current liabilities. If inventory is written off then total assets less current liabilities decreases. Since this is the denominator in the formula for the gearing ratio, the gearing ratio will increase.
February 3, 2019 at 12:24 am
Write off inventory question Nr 5 – The correct answer is ‘Increase Gearing Ratio’.
Please can you advise how write off inventory can influence gearing ratio?
September 5, 2018 at 3:11 am
For number 5 how does the write off of inventory increase the gearing ratio?
September 5, 2018 at 6:02 am
Writing off inventory will reduce the profit, which in turn reduces the total equity. Therefore the gearing will increase.
September 5, 2018 at 7:02 am
Thank you for clarifying 🙂
September 5, 2018 at 2:17 pm
You are welcome 🙂
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