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At the start of the year a company has a NCA amounting to 6$million and by the year end this figure has risen to $8million after depreciation of $600000 has been charged at the end of the year. Working capital at the start of the year has been reported at 0.5$m and by the year end had increased by 0.2$m. Profit for the same period is $1.6m before any depreciation charges has been deducted.
What is the ROI of the company based on average capital employed?
Hello sir i have trouble finding the closing balance of the capital employed.
I have the answer of the back but j don’t understand why for closing 0.5m$ was added??I obviously cannot see how the answer has set out the workings.
However, the opening capital is the NCA of $6M plus the working capital of $0.5M, so a total of $6.5M.
At the end of the year, the NCA are $8M and the working capital is $0.7M (0.5 + 0.2), so a total of $8.7M.
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