Ratios for FNST

guinea pig
guinea pig Trusted RegularRegistered Posts: 402
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

Comments

  • crispy
    crispy Trusted Regular SouthamptonRegistered Posts: 456
    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
    Whirlwind Well-Known Registered Posts: 249
    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
    NicF Well-Known Registered Posts: 108
    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
    guinea pig Trusted Regular Registered Posts: 402
    Many thanks, for your helpful replies,
    Have a good weekend all,
    GP
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