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Question
Following is the extract of balance sheet of Abdul Ltd., as on 31st March, 2019:
| Particulars | Rs. |
| I EQUITY AND LIABILITIES | |
| 1. Shareholders’ Funds | |
| a) Share capital | 2,00,000 |
| b) Reserves and surplus | 50,000 |
| 2. Non-Current liabilities | |
| Long-term borrowings | 1,50,000 |
| 3. Current liabilities | |
| (a) Trade Payable | 1,30,000 |
| (b) Reserves and surplus | 5,000 |
| (c) Short–term provisions | 20,000 |
| Total | 5,55,000 |
Net profit before interest and tax for the year was ₹ 60,000. Calculate the return on capital employed for the year.
Sum
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Solution
Return on Investment
`= "Net profit before interest and tax"/"Capital employed" xx 100`
Capital employed = Shareholders funds + Non-Current liabilities
Shareholders fund = Share capital + Reserve and Surplus
= 2,00,000 + 50,000
= Rs. 2,50,000
Non-Current liability = Rs. 1,50,000
Capital employed = 2,50,000 + 1,50,000
= Rs. 4,00,000
Return on Investment = `60000/400000 xx 100` = 15%
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