Question: Microlimp does not raise any new finance during the year, but it generates a lot of earnings, which are immediately reinvested. If you were calculating
Microlimp does not raise any new finance during the year, but it generates a lot of earnings, which are immediately reinvested. If you were calculating the companys return on capital, would it make more sense to use capital at the start of the year or an average of the starting and ending capital? Would your answer change if Microlimp made a large issue of debt early in the year? Illustrate your answer with simple examples.
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