Question

From the following information, calculate ‘Return on Investment (ROI)’: \[ \begin{array}{|l|l|} \hline \textbf{Particulars} & \textbf{₹} \\ \hline \text{Total Assets} & 22,00,000 \\ \text{10\% Debentures} & 5,00,000 \\ \text{Current Liabilities} & 2,00,000 \\ \text{Net Profit After Tax} & 7,20,000 \\ \text{Tax} & 1,80,000 \\ \hline \end{array} \]

Hint:

To calculate ROI, ensure accurate computation of capital employed and consider profits before tax for consistency.

Answer 1

1. Capital Employed: \[ \text{Capital Employed} = \text{Total Assets} - \text{Current Liabilities} = ₹ 22,00,000 - ₹ 2,00,000 = ₹ 20,00,000. \] 2. Net Profit Before Tax: \[ \text{Net Profit Before Tax} = \text{Net Profit After Tax} + \text{Tax} = ₹ 7,20,000 + ₹ 1,80,000 = ₹ 9,00,000. \] 3. Return on Investment (ROI): \[ \text{ROI} = \frac{\text{Net Profit Before Tax}}{\text{Capital Employed}} \times 100 = \frac{₹ 9,00,000}{₹ 20,00,000} \times 100 = 45\%. \] Final Answer: ROI = \(\mathbf{45\%}\).