State with reason whether the following tansactions will increase decrease or not change the Return on investment Ratio:
(i) purchase of machinery of Rs 500000 by issue of equity shares.
(ii) Charging depreciation of Rs 12500 on machinery.
(iii) Redemption of debentures by chequye Rs 200000
(iv) Converiting Rs 100000, 9% Debentures into equity shares.

Explanation

Return on investment =`("Net profit before interest and tax")/("capital employed")xx100`
(i) purchase of machinery of Rs 500000 by issue of equity shares results in increase in capital employed without any change in profit .Hence return on investment will decrease.
(ii) Charging depreciation of Rs 12500 on machinery results in decrease in both profit and capital employed .Hence Return on investment will decrease.
(iii) Redemption of debentures by cheque Rs 200000 results in decreas in capital employed without any change in profit. hecne retrun on investment will increase.
(iv ) Conveting Rs 100000, 9% Debentures in to equity on investment .since there is no change in net profit and capital employed there will be no change in return on investment.