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Hi Sir. Can you please help?
A company has the following statement of financial position totals at the end of its most recent financial year:
$mNon-current assets 3.64
Current assets 0.42
Share capital and reserves* 2.69
Long-term debt 1.00
Current liabilities 0.37
* Includes retained profit for the year of $0.32m after deductingOrdinary share dividends 0.20
Interest on long-term debt 0.10
Taxation 0.07
Calculate the ROI?
ROI= PBIT/Capital employed
The figures above that I would have picked for PBIT would be:
the 0.32m retained profit + ordinary share dividend 0.20m.
The Answer however also deducts the tax figure of 0.07. I am not sure why- since the retained profit and ordinary share dividend figures do not seem to be after tax? or why would we now deduct tax? I understand that the figure I am looking for is PBIT- but I am a little confused. Sorry if it is silly. the retained profit and ordinary shares are not after tax figures are they?
Thanks
Where is this question from? It doesn’t appear to be a P2 style question and would be more geared towards F7.
I’m not sure why the tax is being deducted as I’d add it back on (similar to what has been done with the dividend) to get to PBIT from the retained earnings for the year.
Thanks
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