Question

For the year 2022-23, the Return on Investment of Yolo Ltd. was 20%; its Capital Employed being ₹ 50,00,000.

1. You are required to give the formula used by Yolo Ltd, to calculate the Return on Investment.
2. You have been provided with two components for calculating Return on Investment. Calculate the missing third component.

Answer 1

Return on Investment = 20%

Capital employed = ₹ 50,00,000

a.

Return on Investment = `("Net Profit before Interest, Tax and Dividends")/("Capital employed")xx100`

b.

Return on Investment = `("Net Profit before Interest, Tax and Dividends")/("Capital employed")xx100`

20 = `("Net Profit before Interest, Tax and Dividends")/("50,00,000")xx100`

`20/100xx50,00,000` = Net profit before Interest, Tax and Dividends

= ₹ 10,00,000