why are these finianical perfromance formulas not working please?

topcat

Hello everyone ,

I am trying to do these two formulas:

ROCE and ASSET turnover but my answer is not agreeing with the book:

i get

ROCE : 625 / 2840+2520 (Operating profit / non current assets + net assets) = 11.66% book gets 22.2% by not including the net assests for some reason??


Asset turnover

i get: (Turnover / non current assets + net assets) = 2500 /2840+2520 = 0.46 times where as the book gets 0.88 times again not including the net assets why ??!


cany anyone help please?

SamiH

ROCE is the same as Return on Net Assets,. so its 625/2840 = 22%

Asset Turnover is Turnover/Net Assets so its 2500/2840 = 0.88 Times

Your Net asset figure already includes your non-current assets, so you shouldn't add them in.

Edit:

In the case above:

Non Current Assets + Current Assets - Non Current Liabilities = Net Assets

SandyHood

SamiH provided a perfect answer. This is a little bit more which I hope also helps.

ROCE = = Operating ProfitROCE nn = nnnnnnnnnnnnm= £625ROCE = = nnnnnnnnn£625nnnnnn= nn 22%
ROCE = Total assets - Current liabilitiesnnnnnnnnn £2520 +£370 - £50Rnnnnnnnn = £2840

SamiH is absolutely right (in this case) ROCE is the same as ROCEbut watch out for questions where there are long-term liabilities as they are also part of capital employed (evenif they are not part of net assets)

topcat

Thank you both very much this helps clear it all up , have a nice weekend