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.
Option 1: 13%
Option 2: 13.75%
Option 3: 10%
Option 4: None of the above
Correct Answer: 13.75%
Solution : Answer = 13.75% ROI=$\frac{\text{N.P before interest and taxes × 100}}{\text {Capital employed}}$
⇒ $\frac{6,00,000+1,00,000+4,00,000\times 100}{\text {80,00,000}}$
⇒ $\frac{11,00,000\times 100}{\text {80,00,000}}$= $\frac{55}{\text {4}}$ = 13.75%. Hence, the correct option is 2.
Question : ______________shows the relationship of profit (profit before interest and tax) with Capital Employed.
Question : A company has earned Rs 5,00,000 as profit before interest and tax. Its ROI is 20%. Calculate return on investment.
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