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Roi

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Roi

  • This topic has 3 replies, 2 voices, and was last updated 7 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • February 11, 2018 at 12:38 pm #436398
    myacca1990
    Participant
    • Topics: 153
    • Replies: 164
    • ☆☆☆

    ROI does not take into account the cost of capital. It merely looks at
    profits relative to capital employed without taking into account the cost of the capital
    which has been invested. It is therefore not consistent with maximising returns to
    investors”
    Sorry sir I had to open the thread again because previously I think you did not understand my question.
    When we calculate the controllable profit figure does not that comes after we deduct the finance costs(cost of capital)?So if yes then the Roi is telling investors that the cost of capital is covered.

    February 11, 2018 at 3:16 pm #436436
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54700
    • ☆☆☆☆☆

    No – the profit is before finance costs. It is the operating profit.

    February 12, 2018 at 8:31 am #436530
    myacca1990
    Participant
    • Topics: 153
    • Replies: 164
    • ☆☆☆

    @johnmoffat said:
    No – the profit is before finance costs. It is the operating profit.

    Thanks Sir for clarifying this time! That,s what i asked.

    February 12, 2018 at 3:11 pm #436589
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54700
    • ☆☆☆☆☆

    You are welcome 🙂

  • Author
    Posts
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