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The current BPP P3 textbook has capital employed = shareholders’ funds plus current liabilities plus any long term provisions for liabilities and charges (Chapter 14 pg 537) for the ROCE formula. However, for P2, and I believe in general, the capital employed formula is “Total Assets less Current Liabilities”. I know that ratio formulae have many variations, but do we have to use a different formula for P3? Or is this just an error in the textbook?
I would always say that capital employed = Shareholders’ finds + Long term loans. This is also equal to Total assets less current liabilities.
No different formula is needed for P3
Capital employed is the sum of shareholders funds and interest bearing liabilities. So should it include deferred tax and long term provision?
And what if a particular loan is interest free?…Should it be included as well???
And the company I am calculating for includes deposits from customers as long term liability…is that interest bearing??@ameera98 said:
Also, is capital subsidy a part of shareholders funds?“” Government grant
During the year ended 31 March 2013, an amount of ` 5 was received towards capital subsidy for the
Hajipur Factory, Bihar in accordance with the State Industrial Policy of Bihar. Out of this, an amount of
0.71 (31 March 2016:0.71) has been credited to the statement of profit and loss (by reducing the
depreciation charge for the year) and the outstanding amount of2.15 (31 March 2016:2.86, 1 April
2015: ` 3.57) has been classified as government grant in the balance sheet “”How do i deal with this in capital employed?
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