Hi everyone,
Just started learning about valuation after suffering some loss in market.
I understand the concept of Economic profit theoretically. But …
- Doesnt profit loss statement consider interest that any company is already paying?
- If the answer is that not all of the capital is funded by loan and hence, isnt reflected in interest row of profit / loss, then should we not consider Max return that could have been obtained if the capital that is not funded by loan was used elsewhere (for ex., say company A invested 100 cr out of which 40 cr was funded by loan and rest was from its own cash. Then, max return that could have been realized by those 60 cr may be taken assuming the same amount was put in govt bonds of say 7%-8%)
- Sorry for changing subject, but pls can someone elaborate between the difference of invested capital and capital employed?
- In invested capital, one should consider net fixed asset, inventories, CWIP and what other part? I understand i can get it by considering difference between Net current asset and Net current liability, but just wanted to understand this better.
And lastly, thanks everyone for posting great stuff.