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Dear Mike
capital employed calculation
at Hardy asset turnover is sales/capital employed, capital employed is total asset – current liability
here total asset=26 200 usd, curent liab=3 400 usd, that gives 22 800 usd, the solution gives 17 600 usd in the denominator for asset turmover
thanksDear Mike
yes, but those items are under the header “non-current” liabilities, and the definition states that “total assets-current liabs”
ThanksHmmm – you need to be a bit selective about which long term liabilities you include within capital employed. For example how much additional capital finance have the directors got available to them as a result of creating a deferred tax provision?
You need to think about what the calculation is trying to show – it’s the %age return on the capital financing available – we’re trying to determine whether our directors are using our resources effectively and a deferred tax provision surely cannot be considered as a resource available
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