Ratios for FNST

guinea pig

Good morning all,
I'm finding it confusing that there are several ways to calculate some of the ratios;

Gearing can be either;
total debt ÷ total debt + equity, x 100, or,
long term debt ÷ long term debt + equity, x 100

ROCE return on capital employed can be;
Operating profit ÷ capital employed, x 100, or
Profit after tax ÷ shareholders funds, x 100 (technically return on shareholders funds)

Anyone find this is a problem in an exam? or am I overthinking?
GP

crispy

I would of thought in the exam it would tell you how Gearing / ROCE is calculated, however if it isn't just show how you have calculated it and apply the same to each company so a valid analysis can be made. The stock way I would calculate these would be:

Gearing:
Debt / Captial Employed (Debt = Long Term Liabilities, Cap Employed = Equity + Long Term Liabilities)

ROCE:
Operating Profit / Capital Employed (Op. Profit = Profit Before Interest & Tax)

Whirlwind

Hi,

According to my notes from FNST (BPP bks) its:-

ROCE
profit from op / (equity + non-current liab) * 100 = ?%

Gearing
Non-current loan / (equity +.non-current liab) = ?times

Hope this helps!

NicF

The gearing ration can be either total debt or long term debt but the exam is clear about which one to use. ROCE is operating profit over capital employed.

Nicola

guinea pig

Many thanks, for your helpful replies,
Have a good weekend all,
GP