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Hi John,
Please advise on the following:
1. Should we use year-end or average figures for calculation of debtor, creditor and inventory turnover period if we are given balance sheet for two years?
2. For exam purpose only, is net profit = EBIT or Profit after Tax? What should be used if both are given for calculation of ROCE?
3. If Bank Overdraft figure or Current Portion of Long-Term debt is given within current liabilities:
a. should it be included for capital employed calculations?
b. Should it be included in debt for gearing calculations?Thanks,
Nitin1. Average, unless you are asked for the calculations for both years in which case you would use end of years (as I say in my lectures).
2 It depends which exam and why you want it!! For the purpose of ratio analysis it is always EBIT (for the reasons I explain in my lectures).
3. If it is intended to be long-term then include it.
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