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Question
Calculate Return on Capital Employed from the following:
| ₹ | |
| Share Capital | 7,20,000 |
| Reserves & Surplus | 6,50,000 |
| Current Liabilities | 7,50,000 |
| Non-Current Assets | 15,00,000 |
| Inventory | 5,00,000 |
| Trade Receivables | 6,00,000 |
| Cash & Bank Balance | 1,00,000 |
| 10% Long-term Borrowings | 5,00,000 |
| Long-term Provisions | 80,000 |
Net Profit before Tax ₹ 2,50,000
Numerical
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Solution
Net Profit before Interest and Tax = Net Profit before Tax + 10% Long-term Borrowings
= ₹ 2,50,000 + `10/100 xx ₹ 5,00,000`
= ₹ 2,50,000 + ₹ 50,000
= ₹ 3,00,000
Capital Employed = Share Capital + Reserves & Surplus + Long-term Borrowings + Long-term Provisions
= ₹ 7,20,000 + ₹ 6,50,000 + ₹ 5,00,000 + ₹ 80,000
= ₹ 19,50,000
Return on Capital Employed = `"Net Profit before Interest and Tax"/"Capital Employed" xx 100`
= `(₹ 3,00,000)/(₹ 19,50,000) xx 100`
= 15.38%
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