Question

Following is the extract of the balance sheet of Babu Ltd., as on 31^st March, 2018:

Net profit before interest and tax for the year was Rs. 25,000. Calculate the return on capital employed for the year.

Answer 1

Return on Capital employed = (Net profit before interest and tax )/(Capital employed) x 100

Capital employed = Share capital + Reserves and surplus + Long term borrowings 

= 2,00,000 + 50,000 + 1,50,000 

= 4,00,000 

Return on Capital employed = 60,000/4,00,000 x 100 

= 15%