State with reason whether the following transactions will increase, decrease or not change the 'Return on Investment' Ratio:
(i) Purchase of machinery worth ₹10,00,000 by issue of equity shares.
(ii) Charging depreciation of ₹25,000 on machinery.
(iii) Redemption of debentures by cheque ₹2,00,000.
(iv) Conversion of 9% Debentures of ₹1,00,000 into equity shares.
|Purchase of machinery worth Rs 10,00,000 by issue of equity shares.||Issue of shares will lead to an increase in the capital employed by Rs 10,00,000.But profit remains intact and so there will be a decline in the return on investment ratio.|
|Charging depreciation of Rs 25,000 on machinery.||Simultaneous decrease in profits and capital employed by Rs 25,000 will lead to a decline in return on investment ratio.|
|Redemption of debentures by cheque Rs 2,00,000.||Redemption of debentures will lead to a decrease in the capital employed by Rs 2,00,000. Butprofit remains intact and so there will be an increase in the return on investment ratio.|
|Conversion of 9% Debentures of Rs 1,00,000 into equity shares.||Decrease in debentures and increase in share capital causing a simultaneous increase and decrease in capital employed will leave the return on investment ratio unchanged.|