- This topic has 1 reply, 2 voices, and was last updated 4 years ago by Ken Garrett.
- You must be logged in to reply to this topic.
Specially for OpenTuition students: 20% off BPP Books for ACCA & CIMA exams – Get your BPP Discount Code >>
Part (iii) Calculation of ROCE
Why is there a need to add back the restructuring cost to the operating profit to find the ROCE?
As the answer says:
“The one area that could be argued is whether to include the one-off costs of restructuring in performance. It would probably be best to disclose both figures to the company’s stakeholders and to identify how any competitor would perform such a calculation for benchmarking.”
performance measures are only useful if compared to something. For example, to previous years’ results or to other, similar companies. However, a specific once-off cost such as the restructuring cost will distort underlying trends and therefore distort judgement of the company’s underlying performance.