Question

Q. 13. Find out the capital employed from the following information:
Normal rate of return :
Profits : 2017-18
2018-19
₹
2019-20
Goodwill valued at 3 years purchase of Super Profits
₹
[Ans. Capital Employed 6,00,000]
12%
80,000
1,30,000
1,56,000
1,50,000​

Answer 1

Answer:

Explanation:see the answer in image given below.

Answer 2

Concept:

Capital Employed-

• The calculation of capital utilised involves deducting current liabilities from total assets or, alternatively, increasing owners' equity by the amount of noncurrent liabilities.
• You can determine how much has been invested by looking at the capital employed.
• To calculate the return on an investment, financial analysts frequently use the return on capital employed (ROCE) statistic.
• Formula,

            Capital Employed= Normal Profit x 100 / Normal rate of   return

Given:

• NRR=12%

• Profits

2017-18 = 80000

2018-19=130000

2019-20=156000

• Goodwill=150000
• Years of purchase=3

Find:

Capital Employed

Solution:

• Average Profits = (80000+130000+156000) / 3

        Average Profits= 122000

• Super profit = Goodwill / Years of purchase

        Super profit = 150000/3

        Super profit = 50000

• Normal Profit = Average Profit - Super profit

        Normal Profit = 122000-50000

        Normal Profit = 72000

• Capital Employed = Normal Profit x 100 / NRR

        Capital Employed = 72000 x 100 / 12

        Capital Employed = 600000

Hence, we can conclude that the capital employed is Rs.600000

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