Question

***Q7 From the following information, calculate Return on Investment:
Net Profit (before Tax) Ratio 24%; Tax Rate 50%; Revenue from Operations Rs. 9,00,000; Net Fixed Assets
Rs. 4,50,000; Accumulated Depreciation Rs. 1,12,500; Non-Current Trade Investments Rs. 45,000; Current
Assets Rs. 90,000; Total Debts Rs. 4,05,000; 15% Long-term Borrowings Rs. 3,60,000.
(ANS. Return on investment = 50%)​

Answer 1

Answer:

Explanation:

Return on investment = Net profit before tax / Capital employed * 100

Net profit before tax = 90000 * 24 /100

= 216000

Net profit before interest and tax = Net profit before tax + Int. on long term

= 216000 + (15 % of 360000)

= 216000 + 54000

= 270000

Current liabili = Total deb - Non current liabili

= 405000 - 360000

= 45000

Capital employed = net fixed assets  + trade investment + working capital

= 45000 + 45000 +45000

= 540000

Return on capital employed on investment =  Net profit before tax / capital employed * 100

= 270000/ 540000 * 100

=  50 %