In the worked example at the end of ch 27, how is the retained profit, investment return and return on capital calculated?
The retained profit is the increase in SHF from one year to the next - so for Company A for Year 2: 318-273=45 Investment return is the total investment income divided by the average assets held over the year - so for Company A for Year 2: 2*(81+28)/(1215+1263)=8.8% Return on capital = profit for shareholders divided by SHF at the start of the year - so for Company A for Year 2: 137/273=50% (note there is no tax mentioned in the question so we have assumed profit for shareholders=profit before tax)
