Question 131 Chapter 4 of +2-B – T.S. Grewal 12 Class

Question 131 Chapter 4 of +2-B

Question 131 Chapter 4 of +2-B

Return on Capital Employed (or Return on Investment) Ratio

131. y Ltd.’s profit after interest and tax was Rs. 1,00,000. Its Current Assets
were Rs. 4,00,000; Current Liabilities Rs. 2,00,000; Fixed Assets Rs.
6,00,000 and 10% Long-term Debt Rs. 4,00,000. The rate of tax was 20%.
Calculate ‘Return on Investment’ of Y Ltd.

 

The solution of Question 131 Chapter 4 of +2-B: –

 

Profit before tax = 100
Tax = 20
Profit after tax = 100 – 20
  = 80
Profit after tax = Rs. 1,00,000
Profit before tax = 100 X Rs.1,00,000
80
  = Rs. 1,25,000
Interest on long-term borrowings = Rs. 4,00, 000 ×10%
  = Rs. 40,000
Capital Employed = Fixed Assets+ Current Assets – Current Liabilities
  = Rs. 6,00,000 + Rs. 4,00,000 – Rs. 2,00,000
  = Rs. 8,00,000

 

Net Profit Ratio = Profit before Interest and Tax X 100
Capital Employed
Net Profit Ratio = Rs. 1,65,000 X 100
Rs. 8,00,000
  = 20.63%    

 

 

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)

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T.S. Grewal’s Analysis of Financial Statements

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