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From the following information related to Naveen Ltd., calculate (a) Return on Investment and (b) Total Assets to Debt Ratio: Information: Fixed Assets Rs. 75,00,000; Current Assets Rs. 40,00,000; Current Liabilities Rs. 27,00,000; 12% Debentures Rs. 80,00,000 and Net Profit before Interest, Tax and Dividend Rs. 14,50,000. 

SOLUTION

1) Return on Investment

Return on Investment = Net Profit Before Interest, Tax and Dividend / Capital Employed × 100
Net Profit Before Interest, Tax And Dividend = Rs. 14,50,000

Capital Employed = Fixed Assets + Current Asset – Current Liabilities
= (75,00,000 + 40,00,000 – 27,00,000)
= Rs. 88,00,000

Return on Investment = 14,50,000 / 88,00,000 × 100
= 16.48%

2) Total Assets to Debt Ratio = Total Assets / Debt
Total Assets = Fixed Assets + Current Assets
= (75,00,000 + 40,00,000)
= Rs. 1,15,00.000

Debt = Rs. 80,00,000
Total Assets to Debt Ratio = 1,15,00,000 / 80,00,000
= 1.44: 1


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