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Hi sir
I am aware we use retained earnings, reserves, share capital non current liabilities but not sure wether to include d tax or creditors in the equity section when calculating roce?
Hi,
A non-current liability is not equity. Retained earnings, reserves and share capital are equity. Deferred tax liabilities and creditors are liabilities and not equity.
Thanks
Just noticed in another question on Roce that long term borrowings and overdraft have been included in the denominator?
I would have classed these as liabilities and not equity?
I think you’re missing the point. Capital employed is equity plus net debt. Net debt is any interest bearing debt, so both borrowings and overdrafts are included as part of liabilities.
Hi sir
O,k so the denominator includes all equity share reserves etc plus net debt overdrafts and borrowings but we exclude creditors and d tax as these are liabilities not equity? So liabilities such as loans are included
Because it is equity plus net debt, but ignore d tax creditors as these are liabilities.What other items do I need to watch out for as this is a bit tricky.
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