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Forums › ACCA Forums › ACCA FM Financial Management Forums › Need Help!!

  • This topic has 1 reply, 2 voices, and was last updated 6 years ago by Chris.
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  • October 26, 2018 at 6:56 pm #479897
    rahuljay
    Member
    • Topics: 6
    • Replies: 7
    • ☆

    In BPP’s book it’s given

    ROCE (ARR) = total profit/Initial Investment

    But in Kaplan’s book it’s given

    ROCE (ARR) = Avg. annual PBIT/Initial Investment

    Which one is correct?

    October 26, 2018 at 7:13 pm #479898
    Chris
    Member
    • Topics: 7
    • Replies: 600
    • ☆☆☆☆

    ROCE and ARR are not the same thing.

    ARR is generally used for individual projects, while ROCE is used for the business as a whole. ARR can be calculated as one figure for multi-year projects, while ROCE is usually only calculated for discrete financial years.

    ARR = average annual PBIT/average investment
    ROCE = PBIT/average capital (equity + long term debt)

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