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From the Following Informations, Calculate Return on Investment (Or Return on Capital Employed): - Accountancy

Sum

From the following informations, calculate Return on Investment (or Return on Capital Employed):

Particulars

Share Capital

5,00,000

Reserves and Surplus 2,50,000
Net Fixed Assets 22,50,000
Non-current Trade Investments 2,50,000
Current Assets 11,00,000
10% Long-term Borrowings 20,00,000
Current Liabilities 8,50,000

Long-term Provision

NIL

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Solution

Net Profit before tax = 6,00,000
Net Profit before interest, tax and dividend = Net Profit before tax + Interest on long-term borrowings
= 6,00,000 + 10% of 20,00,000 = 6,00,000 + 2,00,000 = 8,00,000

Capital Employed = Share Capital + Reserves and Surplus + Long-term borrowings
= 5,00,000 + 2,50,000 + 20,00,000 = 27,50,000

Return on Investment =`"Profit before interest , tax and dividend"/"Capital Employed" xx 100 = 800000/2750000 xx 100 = 29.09 %`

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APPEARS IN

TS Grewal Class 12 Accountancy - Analysis of Financial Statements
Chapter 3 Accounting Ratios
Exercise | Q 147 | Page 110
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