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are finance costs relating to overdraft added to profit before interest and tax when calculating return on capital employed. Why are they included.
Also finance costs relating to lease also added to profit before interest and tax when calculating roceHi,
Finance costs are effectively interest expenses, so would not be within profit before interest and tax. If you are given the profit before tax figure then you would need to work backwards to calculate the PBIT figure by adding the finance costs, as they would previously have been deducted in the statement of profit or loss.
Thanks
In the bpp kit, there is a question mentioned as hassle co where finance costs relating to overdraft of 10000 have been added to the figure that comes after deducting operating expenses from gross profit when calculating the return on capital employed. Why is this so
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