Sir, when should I use one or the other formula?
- capital employed = non-current-assets+investments+current assets-current liabilities
- capital employed = share capital and reserves + non-current assets.
Isn’t it the both ways provide the same result? I faced with tasks that the two formules provide different result.
Thanks,
Ask the Tutor ACCA MA
Financial Performance Measurement
5y ago#1You have typed your second 'formula' wrongly.
Capital employed = share capital and reserves + non-current liabilities (not non-current assets!)
Both ways always have to give the same result.
the task was:
-share capital and reserves-3200
-Long loan-800
-Non-current assets-2800
-Receivables-400
-Inventory-250
-Payables-180
5y ago#3The question has not given all of the balances (for instance, there is no cash figure given). If that was to happen in the exam (which it should not - they should give all the balance) then us the fact that capital employed = share capital plus reserves + non-current liabilities (so in this case is 4,000).
Sign in to reply to this topic.