Question

From the following information related to Naveen Ltd. calculate

(1) Return on Investment and

(2) Total Assets to Debt Ratio.

Information : Fixed Assets Rs 75,00,000; Current Assets Rs  40,00,000; Current Liabilities Rs  27,00,000; 12% Debentures Rs 80,00,000 and Net Profit before Interest, Tax and Dividend Rs 14,50,000.

Answer 1

1) Return on Investment

Return on Invest = `"Net Profit before Interest, Tax and Dividend"/"Capital Employed" xx 100`

Net Profit before Interest, Tax and Dividend = 14,50,000
Capital Employed = Fixed Assets + Current Assets – Current Liabilities
= (75,00,000 + 4,00,000 – 27,00,000)
= 88,00,000

Return on Investment = `1450000/8800000 xx 100`

= 16.48%

2) Total Assets to Debt to Ratio

Total Assets to Debt Ratio = `"Total Assets"/"Debt"`

Total Assets = Fixed Assets + Current Asset
= (75, 00,000 + 40, 00,000)
= 1, 15, 00,000
Debt = 80, 00,000

Total Assets to Debt Ratio = `11500000/8000000 = 1.4375`