BALANCE SHEET OF GLOBAL LTD. as at 31st March, 2019
| Particulars | Note No. | Amount (Rs.) |
| I. EQUITY AND LIABILITIES | ||
| 1. Shareholder’s Funds | ||
| (a) Share Capital–Equity Shares of Rs. 10 each Fully paid | 5,00,000 | |
| (b) Reserves and Surplus | 4,20,000 | |
| 2. Non-Current Liabilities | ||
| 15% Long-term Borrowings | 16,00,000 | |
| 3. Current Liabilities | 8,00,000 | |
| Total | 33,20,000 | |
| II. ASSETS | ||
| 1. Non-Current Assets | ||
| (a) Fixed Assets | 16,00,000 | |
| (b) Non-Current Investments: | ||
| (i) 10% Investments | 2,00,000 | |
| (ii) 10% Non-trade Investments | 1,20,000 | |
| 2. Current Assets | 14,00,000 | |
| Total | 33,20,000 |
Additional Information: Net Profit before Tax for the year 2018-19 is Rs. 9,72,000.
SOLUTION
Return on Investment = (Net Profit before Interest, Tax and Dividend / Capital Employed × 100)
Interest on borrowings = (16,00,000 × 15 / 100)
= Rs. 2,40,000
Net Profit before Tax = Rs. 9,72,000
Net Profit before Interest and Tax = Rs. (9,72,000 + 2,40,000)
= Rs. 12,12,000
Net Profit before Interest and Tax (excluding interest on Non-trade investments) = (12,12,000 – 12,000)
= Rs. 12,00,000
Capital Employed = Shareholder’s Funds + Non-Current Liabilities – Non-Trade Investment
= (5,00,000 + 4,20,000 + 16,00,000 – 1,20,000)
= Rs. 24,00,000
Return on Investment = (12,00,000 / 24,00,000 × 100)
= 50%