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Question 1(b)
1. The model answer stating that 18 days of cost of sales, but from what I understand the formula I should take the average inventory (beginning and end of year) divided by cost of sales and times 365 days, which will be:
[(3.7+3.2)/2] / 143.2 x 365 = 8.8 days
I just could not figure out how 18 days is derived.
Question 1(c)
ROCE = PBIT/ Capital employed
1. ROCE (2007) = 102.3/(179+45) = 45.66%
2. ROCE (2008) = 108.8/(253.9+35) = 37.66%I have actually tried other combinations as the denominator, e.g. equity + total non-current liabilities, or total assets, I still could not reach the figures provided in the model answer as below:
1. ROCE (2007) = 51.2%
2. ROCE (2008) = 42.4%Question 2(b)
In the model answer, paragraph 2, it states the estimation error is 1.9% and 5.3%, may I know which formula to apply for these?
I am really sorry but I cannot help you with either of these questions!!!
This exam was set by the examiner before the examiner before the current examiner. I remember being at a meeting with him when he was asked your first question and he could not give an answer.
That is probably why certainly Kaplan have left this part of the answer out of their Exam Kit.The current examiner is much clearer and so are his answers 🙂
(One point that I would make about your first question is that it is the whole of the working capital that needs financing – not just the inventory. However, this still does not explain where he got 18 days from.)
Sorry 🙁
I see.
I just worried that I applied the wrong method.
I will take note on your advice!
Thanks!
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