DFS R.O.C.E. Ratio and other - Help!

Elvie

I'm getting confused with the ROCE ratio. I have been looking at sample questions from the Text Book we were advised to use and a related workbook, however the text book states Operating Profit over Capital Employed - then the recommended answers in the workbook all use Profit for the Year!. Can anyone help? Am I missing something really simply about the circumstances in which you would use Profit for the year instead of Operating Profit.

I'm also having problems remembering the equity calculation at the bottom of the Consolidated balance sheet. I could remember it last week now its gone.

I'm also losing the ability to spell and type.:crying:

bopit71

This is a nightmare i know!!

I've been told to use Net Profit before interest and tax. I think this equates to the same thing as profit for the year, but easier to remember (PBIT).
Hope it doesn't confuse you more...

Sarah

ani-ari

when you do ratios you use only the profit from operations (in ROCE and net profit ratio)

slackda

Hi Elvie,

Operating profit is the "profit on ordinary activites before intrest and tax"

hope that helps,

when u say problem with the calculation do u mean for example

a Dividend of 5000 is paid with a profit of 10000 when retained earning were 6000

Your retained earnings figure would end up being 6000-5000+10000= 10000

at least thats the way i understand it.

Reserve revaluations should also be put in here along with Share Capital and Share Premium.

hope that helps

Martin

Elvie

Thanks both for your replies.

Ani-Ari, I remember reading that you should use Operating profit where possible instead of Net profit. Now this is probably a stupid question - but does that include when you are asked for the Net Profit Ratio. I'm so confused with all the different rules.

Also for anyone else out there. From reading the threads over the last year or 2 I have had great comfort from the fact that I am not the only one experiencing similar problems with DFS. Does anyone know someone who has passed DFS first time?:001_rolleyes:

Elvie

Thanks also Martin,

It was the Retained Profit
Revaluation Reserve
Share Capital and
Share Premium; I was having trouble with.
Thanks.

bopit71

Net profit ratio also uses PBIT. That's how i find it easier to remember because you would use the same figure on top for both ratios. God help us all...
ps. i left my last college because i moved to a new location but they did DFS last year and they all passed first time.

so it can't be that bad... can it??? :confused1:

Elvie

Which college were you at. I'm willing to move just to pass the damn thing!:tongue_smilie:

I am starting to cheer up though. Chatting to people who know what it's like does help.
Thanks

bopit71

I was studying in Watford. They were really good there, unfortunately (well fortunately other than the college issue!) I moved to Norfolk so travelling 120 miles each way twice a week was not an option!
I'm finishing my revision in a short while, what I don't know now - I never will! Been revising for 4 days solid and am totally brain dead!

slackda

Elvie wrote: »

Thanks also Martin,

It was the Retained Profit
Revaluation Reserve
Share Capital and
Share Premium; I was having trouble with.
Thanks.

Hi Elvie, are u stil having trouble with this?

for the retained profit see my example above for except ive used the wording retained earnings hope thats clear.

revalution reserves only come about when you revalue an asset to a greater vale with increasing the Asset value on the BS.

Share capital- Number of normal shares * the face value

share premium the difference between the value of the Share capital and the price that you sold your shares for. e.g

share face value or oridnary price 1.00
share nominal value (the selling price of the share)=2.00
you sell 100 shares= #100.00 ends up in share capital and 100 ends up in the Share premium.


As far as im aware these can go in any order as long as they are all in the equity section.

Hope that all makes sense

Good luck for tomorrow.

oh and BTW this is my second time talking the Exam, don't let that frighten you off, i failed on the second half of the paper when my brian went blank on the forumla's

Elvie

Thanks Martin

Good luck to you too.


Bopit71
Its a very very very small world. I live on the Cambridgeshire/Norfolk border. But went to Watford college in the early 90's studying something completely different, and was born not too far from there. Good luck to you to for tomorrow.
Elvie

ani-ari

when you calculate roce and net profit ratio you use oprating profit (remember the profit before tax and interest) and when you calculate gross profit ratio you use gross profit. remember you never use profit after tax and interest for any ratios and formulas.
hope this help.

Elvie

It has helped. Thanks ani-ari
Elvie:001_rolleyes:

princess246

Hi Evie

The R.O.C.E Ratio is net profit before interest and tax divide it by net assets multiply by 100 and this should give you the %.

At the bottom of the consolidated balance sheet you should have share capital share premium etc and all those figures should be the same as your balance sheet figure.