Return on Capital Employed = return/capital employed × 100
Where,
Return = Net Profit
± Non-trading adjustments (but not accrual adjustments for
amortization of preliminary expenses, goodwill, etc.)
+ Interest on long term debts + Provision for tax
– Interest/Dividend from non-trade investments
Capital Employed = Equity Share Capital
+ Reserve and Surplus
+ Pref. Share Capital
+ Debentures and other long term loan
– Misc. expenditure and losses
– Non-trade Investments.
Can anyone please tell me, what is meant by Non-trading Adjustments here and why accrual adjustments are not to be touched. Also in Capital Employed why Non Trade Investments have to be deducted?? This definition is given in the IPCC course material. Please help. Thanks in anticipation
CAclubindia
