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Good will?

Prashanth (Chartered Accountant) (2322 Points)

03 October 2011

Hi,

While calculating why do we include proposed dividend in calculation of FMP.I mean why we are not deducting as liability from the total assets to for calculation of capital employed?

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4 Replies

Harshal Fifadra (Chartered Accountant) (1489 Points)
Replied 04 October 2011

Capital Employed = Assets (-) Liabilities

In the above formula liabilities are those ones which are actual liabilities . Proposed dividend is not deducted because it is not an actual liability . The company may in future either increase or decrese the dividend declared . However in case it was Declared Dividend then it is an actual liability and hence it is deducted from the assete to calculate Capital Employed .

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ashish gupta ( student) (1922 Points)
Replied 04 October 2011

harshal is right proposed dividend is not liability

Swapnil Jain (Finance - FP&A) (564 Points)
Replied 09 October 2011

Originally posted by : Harshal
	Capital Employed = Assets (-) Liabilities In the above formula liabilities are those ones which are actual liabilities . Proposed dividend is not deducted because it is not an actual liability . The company may in future either increase or decrese the dividend declared . However in case it was Declared Dividend then it is an actual liability and hence it is deducted from the assete to calculate Capital Employed .