The following information is available:
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.

What will be the return on investment?

32.72%

Return on Investment (or Capital Employed) = Profit before Interest and Tax/ Capital Employed × 100
                                                                          = 720000/2200000 X 100
                                                                        = 32.72%

Capital Employed = Shareholders’ Funds + non-current liabilities
                        = 400000 + 1800000
                          = ₹2200000
* Long-term borrowings are included already in non-current liabilities.

Net Profit Ratio = Net profit/Revenue from Operations × 100
12= (Net profit/ 2500000)X 100
Net profit= (2500000*12)/100
              =₹300000

Tax rate is 50% means profit before tax is 300000 + 300000 = ₹600000
10% Long-term Borrowings = ₹12,00,000 means Interest= 1200000X10/100 = ₹120000
So, net profit before interest and tax = 600000 + 120000 =₹720000