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Hello Sir,
When calculating the payback period we should use the cash inflows.So when we are giving the profit figure we have to adjust it to be cash inflow like adding the depreciation to the operating profit.
But for the ROCE we should use the average operating profit (not the cash inflows)divided by average investment.
Is that correct
By the way are ROCE and ARR dealt with in the same way.
Thanks,
That is correct.
The ARRA is calculated using the average capital employed, whereas the ROCE is usually calculated using the capital employed at the end of the year
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