Question

From the following information, calculate Return on Investment and Total Assets to Debt Ratio. Fixed Assets Rs. 75,00,000, Current Assets Rs. 40,00,000, Current Liabilities Rs. 27,00,000, 12% Debentures Rs. 80,00,000 and Net Profit before Interest, Tax and Dividend Rs. 14,50,000. 

Answer 1

Return on Investment = [(Net Profit before Interest, Tax and Dividend) / Capital Employed]x 100

Net Profit before Interest, Tax and Dividend = 14,50,000 

Capital Employed = Fixed Assets + Current Assets – Current Liabilities

= 75,00,000 + 40,00,000 - 27,00,000 

 = Rs. 88,00,000

Return on Investment = (14,50,000 / 88,00,000) x 100 = 16.48%

Total Assets to Debt Ratio = (Total Assets / Total Debt)

= (75,00,000 + 40,00,000) / 80,00,000

= 1.4375.