I am doing some tutorial questions about financial ratio and encounters some problems that I would like to share in this forum.
Why we use Profit AFTER Interest & Tax as numerator in Return of Equity whereas Profit BEFORE Interest & Tax in Return of Assets?
Why increase in Gross Profit will decrease Return of Capital Employed? Shouldn’t increase in gross profit will push up Profit BEFORE Interest & Tax and increase Return of Capital Employed?
Why repayment of loan will decrease Capital Employed, which in turn increase Return of Capital Employed?
In my understanding, repayment of loan would decrease payables in current liabilities, increase Capital
Employed and ultimately decrease Return of Capital Employed?
Any help is appreciated. Thank you very much.