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in kaplan book ratio chapter…..they says while comparing roce of different entities age of plants to be considered……now why is it so……is it because older plants will have less value…..if they buy new ones more funds they need to brought in which will increase the capital employed…and decrease the roce……is that the reason.
another question if dividend declared after reporting date its a non adjusting event right but before reporting date we have to adjust it from retained earnings n create dividend payable…….and in case of proposed dividend we dont pass any entry as it can get changed…am i right?
in ROCE cal. the books says cap employed can be calculated as Equity + long term liab
or u can take total asset – current liab.
but in Net Asset turnover we need to find cap employed…there the book says to find cap employed by net asset (total asset – total liab)
why this is different one says Total asset – c.l = cap emp
other one says total asset – total liab = cap emp.@sguha said:
in kaplan book ratio chapter…..they says while comparing roce of different entities age of plants to be considered……now why is it so……is it because older plants will have less value…..if they buy new ones more funds they need to brought in which will increase the capital employed…and decrease the roce……is that the reason.Yes, the older the assets (PPE), the lower the capital employed will be. The ROCE can therefore look better in comparison to other entities with newer assets.
@sguha said:
another question if dividend declared after reporting date its a non adjusting event right but before reporting date we have to adjust it from retained earnings n create dividend payable…….and in case of proposed dividend we dont pass any entry as it can get changed…am i right?We only account for dividends when they are declared, and the accounting takes place in the period in which it is declared.
Proposed dividends are disclosed by way of a note to the accounts.
@sguha said:
in ROCE cal. the books says cap employed can be calculated as Equity + long term liabor u can take total asset – current liab.
but in Net Asset turnover we need to find cap employed…there the book says to find cap employed by net asset (total asset – total liab)
why this is different one says Total asset – c.l = cap emp
other one says total asset – total liab = cap emp.Technically, capital employed is equity plus net debt, and the interest bearing debt can be part of current liabilities. So, I’d not try and take any short cuts and calculate it using the correct method.
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