(Calculation of Return on investment when opening balace sheet is given).
From the following balance sheet of avinash ltsd, you are required to calculate return on investment for the year 2019-19:

Explanation

Return on Investement or capital Employted =`("Net profit before interest and tax")/("capital exployed")xx100
`=(Rs 600000)/(Rs 1200000)xx100=50%`
Calculation of net profit before interest and tax: ,
Net profit before tax , 486000
Add: Inteest on Long term Borrowing (15% on Rs 800000), 120000
606000
Less: interest on non trade investment (10% of Rs 60000),6000
Net profit before interst and tax for Roi , 600000
capital exployed (liabilites side approach)
Capital employed = share capital + reserves and surplus (opening )+non currrent liabilites
-Non trade investments
=Rs 250000+Rs 210000+ Rs 800000-Rs 60000=Rs 1200000.