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Hi
In this question from the BPP exam kit it says the division had non current asset of 14.98m and during the year it invested 6.8m.
For calculating capital employed. I took the value of 11.58m- an average of before and after the investment– which was the wrong approach.
But the textbook says using an average value for the period is preferable.
You don’t do what you have read in the textbook as a recommendation – you do what the question asks…….
The question states
calculate the appropriate “closing” return on investment
E.g.
So you take NCA of 9760 + diff between (2480 & -2960) = 9280Sports Co for example clearly states in the scenario
“using controllable profit and average divisional net assets”Thank you for the advice! Didn’t even notice the word ‘closing’ in the question. :S Will look out for the key words.
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