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Good day, Sir.
Would like to ask about the following questions:
1. Why is R&D 12m not capitalised for calculation of ROCE?
2. Why do we need to add back provision of doubtful debt? (Underlying question is how was ROCE affected by this?) And why is it adding back for 2 years instead of just 1 year?
3. Why do we add back non cash expenses when we’re taking the closing of 2011 (ie opening of 2012)? Aren’t the expenses included since it’s an opening figure instead of a closing figure?
Thank you, Sir.
1 The CE to be used is the opening CE so the 12 R&D does not affect that.
2 Provision was 4.5 at end of 2012 and 2 was charged during 2012 so balance was 2.5 at start of year.
3 Non-cash expenses should never have been deducted from proofits or reserves. You have to wind the xllock baxk to see what capital would,have been at the end of 2011 had these expenses nevermbeen incurred.
See this lecture:
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