167 :- Net Profit after interest but before tax Rs 1,40,000; 15% Long term Debts Rs 4,00,000; Shareholder’s Funds Rs 2,40,000. Tax Rate 50%. Calculate Return on Capital Employed.
Solution :-
Interest = 15% of Long – term Debts
= 15% x 4,00,000
= Rs 60,000
Net Profit before Interest and Tax = Net Profit after Interest and Before Tax + Interest
= 1,40,000 + 60,000
= Rs 2,00,000
Capital Employed = 15% Long Term Debts + Shareholder’s Funds
= 4,00,000 + 2,40,000
= Rs 6,40,000
Return on Investment = (Profit before Interest and Tax/Capital Employed) x 100
= (2,00,000/6,40,000) x 100
= 31.25%