# 会计代写|财务会计代写Financial Accounting代考|FNS50217

## 会计代写|财务会计代写Financial Accounting代考|Asset turnover ratios

One approach to exploring the relationship between returns and resources is to consider some or all of the assets as recorded in the balance sheet. Possibilities include considering total assets, net assets (i.e. assets minus liabilities) or non-current assets alone. These could be related to, for example, sales, gross profit, net profit or net operating profit. Using net profit or net operating profit gives an indication of the rate of return being generated through the use of the assets.

Table 7.2 shows six such ratios calculated for Bread Co. for $20 \mathrm{X} 1$ and $20 \mathrm{X} 2$. Care has to be taken in applying ratios like these, for there are many influences on the asset figures used that are not related to business efficiency. For example, a business that buys additional inventory without paying for it, just before the balance sheet date, will show an increase in total assets but not an increase in net assets. Therefore, the net asset picture better reflects the economic reality. The figures used for non-current assets (which are also incorporated into the net asset and total asset figures) are notoriously susceptible to changes in depreciation, impairment, valuation or asset replacement policies. Nevertheless, useful indications of trend can often be discovered from ratios like these, provided that the weaknesses and peculiarities behind the figures in each particular business are explored and understood.

Gomment on the implications for the performance of Bread Co. of the information shown in Table $7.2$.

When looking at Table 7.2, it seems that the efficiency of use of net assets has increased significantly from $20 \mathrm{X} 1$ to $20 \times 2$, as sales to net assets and net profit to net assets have both risen sharply. The other four ratios presented have increased a little. It should also he noticed that the net assets have not increased much, whereas non-current assets and total assets have both increased very substantially. The net assets, unlike either of the other two asset aggregates, have been held down by a sharp increase in liabilities.

## 会计代写|财务会计代写Financial Accounting代考|Return on capital employed

In terms of assessing the efficient use of the resources provided to the business, the ROCE is probably the most important ratio. The capital employed is normally defined as the owners’ equity plus the long-term borrowings of the business. It seeks to embrace all the long-term finance used by the business. The ratio therefore investigates the efficiency of the business as a whole, rather than from the point of view of any particular subset of financiers, such as the owners.

Notice that the ROE compares the return made on the share capital and reserves with the amount of that share capital and reserves. Similarly, in the case of the ROCE, the target is to compare:
(a) the return made on the total of share capital, reserves and long-term borrowings with
(b) the amount of that total.
That is, in contrast to the ROE, the denominator of the ROCE ratio is larger by the amount of a company’s long-term borrowings. It therefore follows that the numerator of the ROCE will be larger than the numerator of the ROE by including the return that relates to those borrowings, i.e. interest. This interest, being an expense of the husiness, has been deducted in arriving at net profit. So, in order to calculate the correct ‘return’ relevant to the ROCE calculation, the interest on the long-term borrowings must be added back to the net profit. The formula for return on capital employed is:
Net profit before interest on long-term borrowings
Owners’ equity + Long-term borrowings Profit before tax is used because interest figures are given gross of any tax effect and to take after-tax profit and then adjust for interest net of tax would require subjective adjustments to the tax charge. This profit figure is sometimes referred to as F.RIT, which stands for earnings before interest and tax.

# 财务会计代考

## 会计代写|财务会计代写Financial Accounting代考|Return on capital employed

(a) 股本、储备金和长期借款总额的回报与
(b) 该总额的金额。

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