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In part 2a Chicory’s average capital employed is divided by two yet Fennel’s opening figure is multiplied by 0.25 and it’s closing by 0.75. Can some please clarify why?
In the absence of other information, average capital employed is the average of opening and closing capital. That was done for Chicory.
In Fennel, we are told that 6m capital was introduced at the end of March, 0.25 the way through the year. So the company had use of 176m for 9 months and 170m for 3 months hence the 0.25 to 0.75 weighting.
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