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Question
Calculate Return on Investment from the following:
| ₹ | |
| Non-Current Assets | 2,00,000 |
| Current Assets | 1,50,000 |
| Current Liabilities | 50,000 |
| Opening Inventory | 40,000 |
| Closing Inventory | 60,000 |
| Purchases | 6,00,000 |
| Carriage Inwards | 15,000 |
| Revenue from Operations | 7,00,000 |
| Office Expenses | 30,000 |
| Interest on Debentures | 12,000 |
| Tax | 7,000 |
Numerical
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Solution
Cost of Revenue from Operations = Opening Inventory + Purchases + Carriage Inwards − Closing Inventory
= ₹ 40,000 + ₹ 6,00,000 + ₹ 15,000 − ₹ 60,000
= ₹ 5,95,000
Gross Profit = Revenue from Operations − Cost of Revenue from Operations
= ₹ 7,00,000 − ₹ 5,95,000
= ₹ 1,05,000
Net Profit before Interest and Tax = Gross Profit − Office Expenses
= ₹ 1,05,000 − ₹ 30,000
= ₹ 75,000
Capital Employed = Non-Current Assets + Current Assets − Current Liabilities
= ₹ 2,00,000 + ₹ 1,50,000 − ₹ 50,000
= ₹ 3,00,000
Return on Investment = `"Net Profit before Interest and Tax"/"Capital Employed" xx 100`
= `(₹ 75,000)/(₹ 3,00,000) xx 100`
= 25%
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