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Hi,
My ratios don’t seem to match on this question !
Gearing : I calculated as debt / equity .. And tried d/d+e
Rice; profit before interest n tax.. / cap employed being 5750
Net profit margin I’m using ‘profit for the year’ figure..
My answers don’t match the Bpp textbook and feel like these would be easy marks lost in the exam.
Could someone pleasee assist .. Thanks in advance
Gearing: 30% = 2,500/8250 = 30.3
ROCE: 18% = 1,500/(5750 + 2,500) = 18% (CE is equity + long term loans)
NP%: 7.5% = (4,000 – 2,500)/20,000 = 7.5%
Thanks a mill… I understand all the calcs. Main difference being d/e … I used to use the whole debt figure rather than just long term debt. So that’s fine now.
.. For net profit when would u use the bottom figure ‘profit for year’ I would see this as the overall net profit … As per the question we have used ‘net profit from operations’ and not net profit.
Net profit would be before interest. Interest should be greated as s a reward to suppliers of capital (like dividends) not an expense.
Hello,may I ask why is it 1500( is it PBIT + the 300 finance cost? If so why is finance cost included in the operation profit), also I don’t really understand why is net profit not the profit for the year figure .
Or is it the 300 finance cost is actually interest but just didn’t label it interest , then how would we know when is it interest cost and when is it not though
Finance costs should always be interest. Dividends should be shown separately.
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