Question 166:
Net Profit before Interest and Tax ₹4,00,000;
15% Long-term Debt ₹8,00,000; Shareholders' Funds ₹4,00,000.
Calculate Return on Investment.
Answer:
Net Profit before Interest and Tax = 4,00,000
Capital Employed = 15% long-term Debt + Shareholders’ Funds
= 8,00,000 + 4,00,000 = 12,00,000
Return on Investment = Net profitBefore
Interest and Tax ×100/ Capital Employed
=
4,00,000×100/12,00,000
=
33.33%
Question 167:
Net
Profit after interest but before tax ₹1,40,000;
15% Long-term Debts 4,00,000; Shareholders' Funds ₹2,40,000; Tax Rate
50%. Calculate Return on Capital Employed.
Answer:
Return
on Capital Employed = Profit Before interest, tax and dividend/ Capital
Employed×100
Return on Capital Employed =
2,00,000/6,40,000×100=31.25%
Working Note:
Interest =4,00,000×15/100=60,000
Profit
Before interest= Profit after interest +Interest
Profit Before interest=1,40,000+60,000=2,00,000
Capital Employed=
Long-term Debts + Shareholders' Funds
Capital Employed=
4,00,000+2,40,000=6,40,000
Question 168:
Y Ltd.'s
profit after interest and tax was ₹1,00,000. Its
Current Assets were ₹4,00,000; Current
Liabilities ₹2,00,000; Fixed Assets ₹6,00,000 and 10% Long-term
Debt ₹4,00,000. The rate of tax was 20%. Calculate 'Return on Investment'
of Y Ltd.
Answer:
Return
on Investment = (Net Profit before Interest, Tax and Dividend/ Capital Employed
× 100)
Let Profit before tax be ₹100
Tax = ₹20
Profit after tax = ₹(100 – 20) = ₹80
If Profit after tax is ₹80 then profit before tax is = ₹100
If Profit after tax is ₹1,00,000 then profit before tax is = ₹(1,00,000
× 100/80) = ₹1,25,000
Interest on long-term borrowings = ₹(4,00,000 × 10/100)= ₹40,000
Profit after interest and Tax = ₹(1,25,000 + 40,000) = ₹1,65,000
Capital Employed = Fixed Assets+ Current Assets – Current Liabilities
= ₹(6,00,000 + 4,00,000 – 2,00,000) = ₹8,00,000
Return on Investment = (1,65,000/8,00,000 × 100 )= 20.625% or 20.63%
(approx.)
Question 169:
Calculate Return on Investment (ROI) from the following
details: Net Profit after Tax ₹6,50,000; Rate of Income Tax 50%; 10%
Debentures of ₹100 each ₹10,00,000; Fixed Assets at cost ₹22,50,000;
Accumulated Depreciation on Fixed Assets up to date ₹2,50,000; Current Assets
₹12,00,000; Current Liabilities ₹4,00,000.
Answer:
Net Fixed Assets = Fixed Assets (at cost) − Accumulated
Depreciation
= 22,50,000 − 2,50,000 =
20,00,000
Capital Employed = Net Fixed Assets + Current Assets −
Current Liabilities
= 20,00,000 + 12,00,000 −
4,00,000
= 28,00,000
Interest on 10% Debentures = 10% of 10,00,000
= 1,00,000
Let Profit before Tax be = x
Profit after Tax = Profit Before Tax
− Tax
Tax Rate = 50%
∴
Tax = 0.5 x
x − 0.5 x = 6,50,000
x
= 13,00,000
Net Profit before Tax = x =13,00,000
Profit before Interest and Tax = Profit before Tax + Interest
on Long-term Debt
= 13,00,000 + 1,00,000
= 14,00,000
Return on Investment = Net profitBefore
Interest and Tax ×100/ Capital Employed
Return on Investment = 14,00,000
×100 / 28,00,000=50%
Question 170:
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%
Ts Grewal Solution 2025-2026
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Class 12 / Volume – III
Chapter 4 – Accounting Ratios