Calculate Return on Investment from the following information :
Net Profit after Tax : Rs. 6,50,000; 12.5% Convertible Debentures : Rs. 8,00,000; Income Tax : 50%; Fixed Assets at cost : Rs. 24,60,000; Depreciation Reserve : Rs. 4,60,000; Current Assets : Rs. 15,00,000; Current Liabilities : Rs. 7,00,000.
Return on Investment = Net Profit before interest and TaxCapital Employed×100
Calculation of Net Profit before Interest and Tax :
Rs.Net Profit after Tax6,50,000––––––––––Net Profit before tax 6,50,000×1005013,00,000Add:Interest:12.5 % on Rs.8,00,0001,00,000¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯14,00,000–––––––––––
Capital Employed = Net Fixed Assets + Current Assets - Current Liabilities
= (24,60,000 - 4,60,000) + 15,00,000 - 7,00,000
Return on Investment = 14,00,00028,00,000×100=50%