Calculation Of Return On Capital Employed Residual Income And Economic Value Added

Question

A) Present an evaluation of the current performance of your chosen company using ROCE, RI, EVA and SVA. (All figures employed should be up to date, i.e. include the latest published financial statement clearly explained / justified and any performance comparisons within industries and / or between countries explained). In regards to EVA the following key adjustments should be considered with omissions being justified.

• Non-cash expense e.g. Goodwill
• Provisions such as bad debts
• Interest on Debt
• R&D charges
• Accounting Depreciation
• Economic Depreciation
• Costs relating to non-capitalized Leases
• Profit / income from marketable securities
• Unusual gains or losses (-/+)
• +Restructuring charges/profits
• +Minority shareholder interests - share of profit
• Deferred tax charges
• Tax provision for year
• Actual tax paid

B) Critically evaluate the usefulness of ROCE, EVA and SVA in assessing company performance. Note: you must make reference to journal articles in this section and reflect on your own experiences of using these techniques.

Summary

The question belongs to Finance and it discusses about calculation of Return on capital employed, residual income, economic value added for a chosen company.

Total Word Count 2865