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dear john
in a specimen question paper, september 2016 question 31.(a) (iii)
for the calculation of ROCE
the total accounting profit have been divided by 4 when finding average,i thought we should do the same on average investment(divide by 4)however the investment have been divided by 2? can you clarify why
best regards
If you have $100 in your pocket today, and you spend during the day so you are left with $10 at the end of the day, then the average amount (the amount you had in the middle of the day is (100 + 10) / 2 = 55.
I hope this makes sense, but if not then watch the Paper F2 lectures on investment appraisal because I do spend time there explaining the logic.
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