Read the following information and answer the question.
Trade Receivables Turnover Ratio = 4 times
Gross Profit Ratio = 20%
Gross Profit for the year was ₹5,00,000
Bills Receivables = ₹60,000
Net Profit (after) Tax Ratio 12%
Tax Rate is 50%
10% Long-term Borrowings = ₹12,00,000
Shareholders' Funds are ₹ 4,00,000
Non-current Liabilities are ₹18,00,000
Sale of goods on credit only.
Calculate the capital employed by the company.
Answer & explanation
Correct answer: option 2
The correct answer is option 2- ₹22,00,000.
Capital Employed = Shareholders’ Funds + non-current liabilities
= 4,00,000 + 18,00,000
= ₹22,00,000
* Long-term borrowings are included already in non-current liabilities.