Question 127 Chapter 4 of +2-B – T.S. Grewal 12 Class

Question 127 Chapter 4 of +2-B

Question 127 Chapter 4 of +2-B

Return on Capital Employed (or Return on Investment) Ratio

127. Calculate Return on Investment (ROI) from the following details: Net
Profit after Tax Rs 6,50,000; Rate of Income Tax 50%; 10% Debentures
of 100 each Rs 10,00,000; Fixed Assets at cost Rs 22,50,000;
Accumulated Depreciation on Fixed Assets up to date Rs 2,50,000;
Current Assets Rs. 12,00,000; Current Liabilities Rs 4,00,000.

 

The solution of Question 127 Chapter 4 of +2-B: –

 

Net Fixed Assets = Fixed Assets at cost − Accumulated Depreciation
  = Rs. 22,50,000 – Rs. 2,50,000
  = Rs. 20,00,000
Capital Employed = Net Fixed Assets + Current Assets − Current Liabilities
  = 20,00,000 + Rs. 12,00,000 – Rs. 4,00,000
  = Rs. 28,00,000
Interest of Debentures = Rs. 10,00,000 x 10%
  = Rs. 1,00,000
Profit before Tax = x
Profit after Tax = Profit before Tax − Tax
Tax Rate = 50%
Tax = .5x
x − 0.5 x = Rs. 6,50,000
0.5 x = Rs. 6,50,000
     
x = Rs. 6,50,000
0.5
Net Profit before Tax = Rs. 13,00,000

 

Profit before Interest and Tax = Profit before Tax + Interest on Long-term Debt
  = Rs. 14,00,000
Net Profit Ratio = Profit before Interest and Tax X 100
Capital Employed
Net Profit Ratio = Rs. 14,00,000 X 100
Rs. 28,00,000
  = 50%    

 

 

Balance Sheet: Meaning, Format & Examples

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Also, Check out the solved question of previous Chapters: –

T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication

2 Book 3 min 225x300 - Question 127 Chapter 4 of +2-B  - T.S. Grewal 12 Class
T.S. Grewal’s Analysis of Financial Statements

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