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Hello tuitors, i have a few questions when i am studying F3
1)the function for return on capital employed is
Profit/ Capital employed
but profit is used to calculate capital employed, do we use the capital employed at the start of the year? or do we use the computed profit at the end of the year?2)the function for Debt/Equity ratio is
Fix interest capital(NCL + preference share)/Equity
do we need to exclude preference share from equity when we are calculating this?Firstly, if you want me to answer you must ask in the Ask the Tutor Forum – this forum is for students to help each other.
However, the answer to your first question is that there is no rule and it depends why it is being calculated. Usually we would use the opening capital employed, but if it is being used to assess the performance of managers (as ROI) then it would usually be the closing capital employed.
With regard to your second question, yes equity is only ordinary shares and reserves.
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