Question 171:
From the following information, calculate 'Return on Investment':
|
Shareholders' Funds |
₹16,00,000 |
|
10% Debentures |
₹8,00,000 |
|
Current Liabilities |
₹2,00,000 |
|
Current Assets |
₹5,00,000 |
|
Non-Current Assets |
₹21,00,000 |
Net Profit after Tax was ₹3,00,000 and the tax amounted to ₹1,00,000.
(CBSE 2025)
Answer:
'Return
on Investment = 
'Return
on Investment = 
= 20%
Working Notes:
Net Profit before Tax = ₹3,00,000 + 1,00,000+ 80,000 = 4,80,000
Capital Employed = 16,00,000 + 8,00,000 = 24,00,000
Question 172:
From the following information, 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 |
||
|
|
|
|
|
Answer:
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 =
Net profitBefore Interest, Tax and Dividend ×100/ Capital Employed
=8,00,000×100/27,50,0000
=29.09%
Question 173:
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.
Answer:
|
Transaction |
Impact |
|
Purchase of machinery worth ₹10,00,000 by issue of equity shares. |
Issue of shares will lead to an increase in the capital employed by ₹10,00,000.But profit remains intact and so there will be a decline in the return on investment ratio. |
|
Charging depreciation of ₹25,000 on machinery. |
Simultaneous decrease in profits and capital employed by ₹25,000 will lead to a decline in return on investment ratio. |
|
Redemption of debentures by cheque ₹2,00,000. |
Redemption of debentures will lead to a decrease in the capital employed by ₹2,00,000. Butprofit remains intact and so there will be an increase in the return on investment ratio. |
|
Conversion of 9% Debentures of ₹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. |
Miscellaneous
Question 174:
Calculate Quick Ratio' and 'Debt-Equity Ratio' from the following information:
Particulars |
₹ |
Particulars |
₹ |
Total Debt |
8,00,000 |
Working Capital |
2,40,000 |
Inventory |
2,20,000 |
Shareholders' Funds |
12,00,000 |
Long-term Debts |
6,00,000 |
|
|
(CBSE 2024)
Answer:
Calculation of Quick Ration:
Quick Ratio = Quick Assets ÷ Current Liabilities
Quick Ratio = 2,20,000÷ 2,00,000 = 1.1: 1
Current Assets = Current Liabilities + Working Capital
Current Assets = 2,00,000 + 2,40,000 =4,40,000
Quick Assets = 4,40,000 -2,20,000(Inventories)= 2,20,000
Current Liabilities = Total Debt - Long-term Debts
Current Liabilities = 8,00,000 – 6,00,000 =2,00,000
Question 175:
Calculate Revenue from Operations of BN Ltd. from the following information:
Current Assets 8,00,000
Quick Ratio is 1.5:1
Current Ratio is 2:1.
Inventory Turnover Ratio is 6 times.
Goods were sold at a profit of 25% on cost.
(CBSE 2019)
Answer:
Current Ratio = Current Assets/ Current Liabilities
2:1 = 8,00,000/ Current Liabilities
Current Liabilities= 8,00,000/2=4,00,000
Quick Assets= 4,00,000×1.5=6,00,000
Working Capital = Current Assets - Current Liabilities
Working Capital = 8,00,000 – 4,00,000
Working Capital = 4,00,000
Inventory= Current Assets – Quick Assets
Inventory= 8,00,000 – 6,00,000
Inventory= 2,00,000
Inventory Turnover Ratio= Cost of Revenue from operation/Average Inventory
Cost of Revenue from operation = Inventory× Inventory Turnover Ratio
Cost of Revenue from operation = 2,00,000× 6
Cost of Revenue from operation = 12,00,000
Profit of 25% on cost
therefore,
it is assumed that
Cost is equal to 100%
|
Revenue |
= |
Cost |
+ Profit |
|
125 |
= |
100 |
+25 |
Hence,
Revenue= 12,00,000×125/100=15,00,000
Ts Grewal Solution 2026-2027
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Class 12 / Volume – III
Chapter 4 – Accounting Ratios