170 :- From the following information, calculate Return on Investment (or Return on Capital Employed) :
Net Profit before Tax Rs 6,00,000.
Solution :-
Interest = 10% of Long – term Borrowings
= 10/100 x 20,00,000
= Rs 2,00,000
Net Profit before Tax and Interest = Net Profit before Tax + Interest
= 6,00,000 + 2,00,000
= Rs 8,00,000
Capital Employed = Share Capital + Reserves and Surplus + 10% Long term Borrowings + Long term Provisions
= 5,00,000 + 2,50,000 + 20,00,000 + 0
= Rs 27,50,000
Return on Investment = Profit before Tax and Interest/Capital Employed x 100
= 8,00,000/27,50,000 x 100
= 29.09%