Net Profit after interest but before tax is ₹4,30,000, Tax is 30%, 10% Debentures ₹3,00,000, Capital Employed is ₹20,00,000. Calculate Return on Investment from the following information.
Answer & explanation
Correct answer: option 1
ROI = (Net Profit before interest and tax X 100)/ Capital Employed
= (4,60,000 X 100) / 20,00,000
= 23%
* Interest on debentures= 10% of 3,00,000 = ₹30,000
* Net profit before interest and tax = Net profit after interest and before tax + interest on debentures
= 430000 + 30000 = ₹460000