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J18 Q3 a i

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › J18 Q3 a i

  • This topic has 3 replies, 2 voices, and was last updated 1 year ago by John Moffat.
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  • September 25, 2021 at 5:35 pm #636492
    humai
    Participant
    • Topics: 741
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    • ☆☆☆☆

    Sir in this question in estimating Arthuro Co’s forecast dividend capacity through FCF equity method why they have deducted profit on disposal of NCA? Profit on disposal of NCA does not come in FCF equity?

    September 26, 2021 at 10:20 am #636515
    John Moffat
    Keymaster
    • Topics: 56
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    • ☆☆☆☆☆

    The dividend capacity is the cash that is available for dividends.

    The profit on disposal is not cash, which is why it has been subtracted. It is the proceeds that are cash and so that has been added.

    September 26, 2021 at 11:33 pm #636542
    humai
    Participant
    • Topics: 741
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    • ☆☆☆☆

    If I am following below format for dividend capacity i.e

    FCF equity (working 1) X

    Add dividend from B co X

    Less additional tax X

    So deducting profit on disposal of NCA adding cash received on disposal of NCA, I should show in above format or should I show it in FCF equity working 1?

    September 27, 2021 at 8:43 am #636564
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51573
    • ☆☆☆☆☆

    It doesn’t matter where you show it in your workings (provided, as always, they are clear for the markers).

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