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Sir there are 2 similar questions in bpp 25.3 and 25.6, both of them we have to calculate performance measures and sir in both for calculating capital employed in 25.3, we are adding long term borrowings with share capital and reserves, while in 25.6 we add all current assets and non current assets and deduct current liability, and sir because of this we get different asset turnover and different return on capital employed, can you tell me which is correct way to calculate capital employed
Which edition of the Revision Kit are you using, because 25.3 and 25.6 in my edition are questions on variances!!
However I think I might know from past postings what you are referring to, and it was a mistake by BPP.
As should be clear from my lectures, the capital employed (share capital, reserves and long-term borrowings) is always equal to total assets less current liabilities. Therefore either way gives the same answer.
If I am right about the BPP questions, the two totals are not the same which is impossible in real life and is a mistake by BPP.
Sir 2019-2020 edition, so that is a mistake and by total assets you meant non current assets plus current minus current liabilities am i right sir? Thank you sir
Total assets are non-current assets plus current assets.
The capital employed is always equal to the total assets less the current liabilities.
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