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Sir if ROCE of company of 15% is lower than sector average of 20%. and here we have to calculate in terms of % the underperformance then would we do as follow
20-15= 5/20 x 100 = 25%
Similarly, if ROCE of company of 25% is higher than sector average of 20%. and here we have to calculate in terms of % the overperformance then would we do as follow
25-20 = 5/20 x 100 = 25%
I’m not too sure why you’re doing what you’re trying to do. I don’t recall being asked to do this in any previous FR exams.
In dec 12 , there was a question “Quartile”, its ROCE was 12.1%, and the sector’s ROCE was 16%, so while writing the commentary examiner has mentioned that Measured as a percentage, this underperformance is 28% ((16·8– 12·1)/16·8).
So suppose the commpany’s ROCE was 15% and the sector’s ROCE was 10%, so while writing the commentary we will write the overperformance is __.
So here we will calculate this as ((10– 15)/10) = 33.33%. Is this calculation correct or wrong?
This is the examiner’s commentary and not something that you would be expected to reciprocate in the exam, but to answer your question above then yes it has performed 33% better than the industry.