• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Ask AI
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

20% off ACCA & CIMA Books

OpenTuition recommends the new interactive BPP books for September 2025 exams.
Get your discount code >>

Way to alter the asset base of ROI

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Way to alter the asset base of ROI

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by LMR1006.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • November 30, 2023 at 10:42 am #695755
    MelodyC
    Participant
    • Topics: 14
    • Replies: 20
    • ☆

    Sir, I read the following explanation about ROI in the textbook.

    If a manager’s large bonus depends on ROI being met, the manager may feel pressure to massage the
    measure. The asset base of the ratio can be altered by increasing/decreasing payables and receivables
    (by speeding up or delaying payments and receipts).

    My understanding is:

    The asset base of the ratio refers to ‘Capital employed’ which is always equal to either ‘Total assets minus current liabilities’ or ‘Non-current assets plus working capital’. So the base can be altered by manipulating payables since the denominator of the formula changes depending on the amount of payables(=current liabilities), which leads to, for example, more current liabilities –> lower denominator –> higher ROI.

    But for receivables, I don’t think that manipulating receivables will impact the asset base. Because ‘Capital employed’ includes cash, and cash is related to receivables. So whether you choose to delay collection of receivables or collect cash immediately, both should result in the same base as receivables will eventually be converted into cash.

    Could you tell me what is wrong with my understanding?

    November 30, 2023 at 4:19 pm #695766
    LMR1006
    Keymaster
    • Topics: 4
    • Replies: 1508
    • ☆☆☆☆☆

    But ROCE can also be calculated as

    op profit/rev * revenue/CE

    So ROCE could fall by generating lower sales from the company’s capital (lower asset turnover) and or generating a lower operating profit margin.

    Reporting false revenue
    Pushing back current revenue to a later period

  • Author
    Posts
Viewing 2 posts - 1 through 2 (of 2 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

Donate
If you have benefited from our materials, please donate

ACCA News:

ACCA My Exam Performance for non-variant

Applied Skills exams is available NOW

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

ACCA CBE 2025 Exams

How was your exam, and what was the exam result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Donate

If you have benefited from OpenTuition please donate.

PQ Magazine

Latest Comments

  • dkessilfie on FM Chapter 1 Questions – Financial management objectives
  • ahmadhoney on ACCA Advanced Audit and Assurance (AAA) The Audit Report 3: Types of Audit Report
  • Bimasha@123 on Discounted Cash Flow Techniques – ACCA Advanced Performance Management (APM)
  • Ken Garrett on Discounted Cash Flow Techniques – ACCA Advanced Performance Management (APM)
  • Bimasha@123 on Discounted Cash Flow Techniques – ACCA Advanced Performance Management (APM)

Copyright © 2025 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in