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Question
Following is the Balance Sheet of Ganesh Ltd. as at 31st March, 2023:
| Particulars | Note No. |
₹ |
| I. EQUITY AND LIABILITIES: | ||
| Shareholder’s Fund: | ||
| (a) Share Capital | 30,00,000 | |
| (b) Reserve & Surplus | 1 | 23,00,000 |
| Non-Current Liabilities: | ||
| Long-term Borrowings | 2 | 22,00,000 |
| Current Liabilities: | ||
| Trade Payables | 4,00,000 | |
| TOTAL | 79,00,000 | |
| II. ASSETS: | ||
| Non-Current Assets: | ||
| Property, Plant and Equipment and Intangible Assets | 55,00,000 | |
| Current Assets: | ||
| (a) Inventory | 12,00,000 | |
| (b) Trade Receivables | 9,00,000 | |
| (c) Cash & Bank Balance | 3,00,000 | |
| TOTAL | 79,00,000 |
Notes:
| Particulars | ₹ |
| (1) Reserve & Surplus: | |
| Reserve | 13,00,000 |
| Profit for the year | 10,00,000 |
| 23,00,000 | |
| (2) Long-term Borrowings: | |
| 8% Loans | 10,00,000 |
| 10% Debentures | 12,00,000 |
| 22,00,000 |
Calculate ‘Return on Capital Employed’.
Numerical
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Solution
Net Profit before Interest and Tax = Profit for the year + 8% Interest on Loans + 10% Interest on Debentures
= ₹ 10,00,000 + `8/100 xx ₹ 10,00,000 + 10/100 xx ₹ 12,00,000`
= ₹ 10,00,000 + ₹ 80,000 + ₹ 1,20,000
= ₹ 12,00,000
Capital Employed = Share Capital + Reserve & Surplus + Long-term Borrowings
= ₹ 30,00,000 + ₹ 23,00,000 + ₹ 22,00,000
= ₹ 75,00,000
Return on Capital Employed = `"Net Profit before Interest and Tax"/"Capital Employed" xx 100`
Return on Capital Employed = `(₹ 12,00,000)/(₹ 75,00,000) xx 100`
= 16%
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