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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › why it's incorrect: ROCE
Hi Tutor
is below sentence incorrect to describe ROCE?
ROCE can be defined as profit before interest and tax divided by the sum of shareholders’ funds and prior charge capital.
my understanding about prior charge capital is long term liability, which is non- current liabilities. isn’t correct?
what is interest-bearing finance? how should I understand ” capital employed is measured as equity plus interest-bearing finance, i.e. the long-term finance supporting the business. This usually includes all lease liabilities, whether they are shown as current or non-current”. Should it elaborate as equity + non-current liabilities?
if so, prior charge capital = interest-bearing finance = non – current liabilites?
Thanks
Hi,
Don’t get too confused with ROCE. From a FR perspective the capital employed is the equity plus net debt. Net debt is any interest bearing debt (current and non-current) less and cash.
Thanks