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✦ FREE LEARNING — CLASS 11 & 12 — CBSE · PSEB — ACCOUNTS · ECONOMICS · BST ✦
From the following information, calculate (i) Return on Investment Ratio and (ii) Net Assets Turnover Ratio:
| Net Profit after Interest and Tax | 2,40,000 |
| Tax | 1,60,000 |
| Net Fixed Assets (Property, Plant and Equipment and Intangible Assets) | 10,00,000 |
| Non-current Investments (Non-trade) | 1,00,000 |
| Equity Share Capital (Face Value ₹10 per share) | 5,00,000 |
| 15% Preference Share Capital | 1,00,000 |
| Reserves and Surplus (including surplus of the year under consideration) | 2,00,000 |
| 10% Debentures | 4,00,000 |
| Revenue from Operations | 24,00,000 |
(i) Return on Investment Ratio
Interest on 10% Debentures = 10% of 4,00,000 = ₹40,000
Profit before Interest and Tax = Net Profit after Interest and Tax + Tax + Interest
= 2,40,000 + 1,60,000 + 40,000 = ₹4,40,000
Capital Employed = Equity Share Capital + 15% Preference Share Capital + Reserves and Surplus + 10% Debentures
= 5,00,000 + 1,00,000 + 2,00,000 + 4,00,000 = ₹12,00,000
Return on Investment = 4,40,000 ÷ 12,00,000 × 100 = 36.67%
(Note: Non-current Investments (Non-trade) is excluded from Capital Employed, as it is non-trade.)
(ii) Net Assets Turnover Ratio
Net Assets Turnover Ratio = Revenue from Operations ÷ Capital Employed = 24,00,000 ÷ 12,00,000 = 2 times
Accounting & Commerce Educator
Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.
This guide covers "T.S. Grewal Class 12 Vol 3 Chapter 4 Q.177 - Accounting Ratios", focusing on key definitions, step-by-step concepts, applications, and revision guidelines relevant to Chapter 4 - Accounting Ratios.
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