ROCE

Hi can you explain the $590 deducted from the PBIT in this question. Is it the finance cost? if it is, why not deduct the overdraft? Thank you so much!

Victular is a public company that would like to acquire (100% of) a suitable private company. It has obtained the
following draft financial statements for two companies, Grappa and Merlot. They operate in the same industry and
their managements have indicated that they would be receptive to a takeover.
Income statements for the year ended 30 September 2008
Grappa Merlot
$’000 $’000 $’000 $’000
Revenue 12,000 20,500
Cost of sales (10,500) (18,000) –––––––– ––––––––
Gross profit 1,500 2,500
Operating expenses (240) (500)
Finance costs – loan (210) (300)
– overdraft nil (10)
– lease nil (290) –––––––– ––––––––
Profit before tax 1,050 1,400
Income tax expense (150) (400) –––––––– ––––––––
Profit for the year 900 1,000 –––––––– ––––––––
Note: dividends paid during the year 250 700 –––––––– ––––––––
Statements of financial position as at 30 September 2008
Assets
Non-current assets
Freehold factory (note (i)) 4,400 nil
Owned plant (note (ii)) 5,000 2,200
Leased plant (note (ii)) nil 5,300 –––––––– ––––––––
9,400 7,500
Current assets
Inventory 2,000 3,600
Trade receivables 2,400 3,700
Bank 600 5,000 nil 7,300 –––––––– –––––––– –––––––– ––––––––
Total assets 14,400 14,800 –––––––– ––––––––
Equity and liabilities
Equity shares of $1 each 2,000 2,000
Property revaluation reserve 900 nil
Retained earnings 2,600 3,500 800 800 –––––––– –––––––– –––––––– ––––––––
5,500 2,800
Non-current liabilities
Finance lease obligations (note (iii)) nil 3,200
7% loan notes 3,000 nil
10% loan notes nil 3,000
Deferred tax 600 100
Government grants 1,200 4,800 nil 6,300 –––––––– ––––––––
Current liabilities
Bank overdraft nil 1,200
Trade payables 3,100 3,800
Government grants 400 nil
Finance lease obligations (note (iii)) nil 500
Taxation 600 4,100 200 5,700 –––––––– –––––––– –––––––– ––––––––

This question is from the Kaplan Study Text.. Q.416