Question

Following is the Balance Sheet of the Bharati Ltd. as at 31st March, 2019:

Particulars		Note No.	Amount (₹)
I. EQUITY AND LIABILITIES 1. Shareholder's Funds
(a) Share Capital			7,50,000
(b) Reserves and Surplus:
Surplus, i.e., Balance in Statement of Profit and Loss:
Opening Balance	6,30,000		20,88,000
Add: Transfer from Statement of Profit and Loss	14,58,000
2. Non-Current Liabilities
15% Long-term Borrowings			24,00,000
3. Current Liabilities			12,00,000
Total			64,38,000
II. ASSETS
1. Non-Current Assets
(a) Fixed Assets			27,00,000
(b) Non-Current Investments:
(i) 10% Investments			3,00,000
(ii) 10% Non-trade Investments			1,80,000
2. Current Assets			32,58,000
Total			64,38,000

You are required to calculate Return on Investment for the year 2018-19 with reference to Opening Capital Employed. 

Answer 1

Return on Investment = (Net Profit before Interest, Tax and Dividend/ Capital Employed × 100)
Interest on borrowings = ₹ (24,00,000 × 15/100) = ₹3,60,000
Net Profit before Interest and Tax = Net Profit after tax + Interest on borrowings – Interest received on Non-trade Investments
                                                = ₹ (14,58,000 + 3,60,000 – 18,000) = ₹ 18,00,000
Opening Capital Employed = Shareholder’s Funds (Opening) + Non-Current Liabilities (Opening) – Non-Trade Investment
                                         = ₹(7,50,000 + 6,30,000 + 24,00,000 – 1,80,000) = ₹36,00,000
Return on Investment = (18,00,000/36,00,000 × 100) = 50%