| Particulars | Note No. | Amount (Rs.) |
| I. EQUITY AND LIABILITIES 1. Shareholder’s Funds | ||
| (a) Share Capital | 7,50,000 | |
| (b) Reserves and Surplus: | ||
| Surplus, i.e., Balance in Statement of Profit and Loss: | ||
| Opening Balance – 6,30,000 | ||
| Add: Transfer from Statement of Profit and Loss – 14,58,000 | 20,88,000 | |
| 2. Non-Current Liabilities | ||
| 15% Long-term Borrowings | 24,00,000 | |
| 3. Current Liabilities | 12,00,000 | |
| Total | 64,38,000 | |
| II. ASSETS | ||
| 1. Non-Current Assets | ||
| (a) Fixed Assets | 27,00,000 | |
| (b) Non-Current Investments: | ||
| (i) 10% Investments | 3,00,000 | |
| (ii) 10% Non-trade Investments | 1,80,000 | |
| 2. Current Assets | 32,58,000 | |
| Total | 64,38,000 |
You are required to calculate Return on Investment for the year 2018 – 19 with reference to Opening Capital Employed.
SOLUTION
Return on Investment = (Net Profit before Interest, Tax and Dividend / Capital Employed × 100)
Interest on borrowings = (24,00,000 × 15 / 100)
= Rs. 3,60,000
Net Profit before Interest and Tax = Net Profit after tax + Interest on borrowings Interest received on Non-trade Investments
= (14,58,000 + 3,60,000 – 18,000)
= Rs. 18,00,000
Opening Capital Employed = Shareholder’s Funds (Opening) + Non-Current Liabilities (Opening) – Non-Trade Investment
= (7,50,000 + 6,30,000 + 24,00,000 – 1,80,000)
= Rs. 36,00,000
Return on Investment = (18,00,000 / 36,00,000 × 100)
= 50%