Question : A company has earned Rs 5,00,000 as profit before interest and tax. Its ROI is 20%. Calculate return on investment.
Option 1: Shareholder fund
Option 2: Market price of share
Option 3: Capital employed
Option 4: None of the above
Correct Answer: Capital employed
Solution : Answer = Capital employed Return on capital employed=$\frac{\text{N.P before interest on taxes}}{\text{Capital employed}} \times 100$
⇒ Capital employed= $\frac{5,00,000}{20} \times 100$= Rs 25,00,000. Hence, the correct option is 3.
Question : With the help of the following information, calculate the Return on Investment: Net Profit after Interest and Tax Rs. 6,00,000; 10% Debentures Rs. 10,00,000; Tax @ 40%; Capital Employed Rs. 80,00,000.
Question : ______________shows the relationship of profit (profit before interest and tax) with Capital Employed.
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