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Ratios Mowair Co Sept/Dec 17

Forums › ACCA Forums › ACCA FR Financial Reporting Forums › Ratios Mowair Co Sept/Dec 17

  • This topic has 1 reply, 2 voices, and was last updated 5 years ago by f6ali.
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  • July 30, 2019 at 10:53 pm #525672
    katsquick
    Member
    • Topics: 1
    • Replies: 1
    • ☆

    Good evening,

    please could someone explain why are we not adding back to Profit from operations (in case of Mowair Co -Q.228 in BPP rev.kit) the finance costs?

    For OP ratio, ROCE and Interest cover we use as PBIT 12,300 and not adding back 9,200 finance costs? Other examples and the definition suggest that finance costs are added to profit before tax so I am confused about this one. I am trying to search forums for this answer, but not having any luck.

    Please help.

    thanks,

    Kat

    July 31, 2019 at 12:58 pm #525723
    f6ali
    Member
    • Topics: 10
    • Replies: 342
    • ☆☆☆

    As far as FR exam is concerned, you can use both Profit Before Interest & Tax and Profit Before Tax for performance assessment. That is why examiner has used PBIT in some questions and PBT in the rest.

    However, if the question specifically states to use either of the figures then you are bound to do what the question has asked. Otherwise, you are free to use either.

    Hope it helps.

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