Answer the questions from the passage-
Following information is provided about a Company:
Share Capital:
Equity (Rs.10) Rs. 4,00,000
12% Preference Rs. 1,00,000
General Reserve Rs. 1,84,000
10% Debentures Rs. 4,00,000
Current Liabilities Rs. 1,00,000
Fixed Assets Rs. 9,50,000
Current Assets Rs. 2,34,000
The market price of the share is Rs. 34 and the net profit after tax was Rs. 1,50,000, and the tax had amounted to Rs. 50,000.
Return on Shareholders' Funds
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → 21.93%
Return on shareholders’ funds shows what the owners earn on the funds they have put in. The profit is the profit after tax, since interest and tax are paid before anything reaches the shareholders, and the base is the shareholders’ funds only.
Shareholders’ funds = Equity Rs 4,00,000 + Preference Rs 1,00,000 + General Reserve Rs 1,84,000 = Rs 6,84,000
Return = Rs 1,50,000 ÷ Rs 6,84,000 × 100 = 21.93%
The 10% debentures and current liabilities are borrowed funds, so they stay out of the base here, though the debentures do enter capital employed for ROI.
NCERT (2026-27 edition):
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