Accountancy

State with reason whether the following transactions will increase, decrease or not change the ‘Return on Investment’ Ratio: (i) Purchase of machinery worth Rs. 10,00,000 by issue of equity shares. (ii) Charging depreciation of Rs. 25,000 on machinery. (iii) Redemption of debentures by cheque Rs. 2,00,000. (iv) Conversion of 9% Debentures of Rs. 1,00,000 into equity shares.

SOLUTION

Continue ReadingState with reason whether the following transactions will increase, decrease or not change the ‘Return on Investment’ Ratio: (i) Purchase of machinery worth Rs. 10,00,000 by issue of equity shares. (ii) Charging depreciation of Rs. 25,000 on machinery. (iii) Redemption of debentures by cheque Rs. 2,00,000. (iv) Conversion of 9% Debentures of Rs. 1,00,000 into equity shares.

From the following Balance Sheet of Global Ltd., you are required to calculate Return on Investment for the year 2018-19:

BALANCE SHEET OF GLOBAL LTD. as at 31st March, 2019 ParticularsNote 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 4,20,0002. Non-Current Liabilities 15% Long-term Borrowings 16,00,0003.…

Continue ReadingFrom the following Balance Sheet of Global Ltd., you are required to calculate Return on Investment for the year 2018-19:

Y Ltd.’s profit after interest and tax was Rs. 1,00,000. Its Current Assets were Rs. 4,00,000; Current Liabilities Rs. 2,00,000; Fixed Assets Rs. 6,00,000 and 10% Long-term Debt Rs. 4,00,000. The rate of tax was 20%. Calculate ‘Return on Investment’ of Y Ltd.

SOLUTION Return on Investment = (Net Profit before Interest, Tax and Dividend /  Capital Employed × 100)Let Profit before tax be Rs. 100Tax = Rs. 20Profit after tax = (100 – 20) = Rs. 80If Profit…

Continue ReadingY Ltd.’s profit after interest and tax was Rs. 1,00,000. Its Current Assets were Rs. 4,00,000; Current Liabilities Rs. 2,00,000; Fixed Assets Rs. 6,00,000 and 10% Long-term Debt Rs. 4,00,000. The rate of tax was 20%. Calculate ‘Return on Investment’ of Y Ltd.

Net Profit before Interest and Tax Rs. 4,00,000; 15% Long-term Debt Rs. 8,00,000; Shareholders’ Funds Rs. 4,00,000. Calculate Return on Investment.

SOLUTION Net Profit before Interest and Tax = 4,00,000Capital Employed = 15% long-term Debt + Shareholders’ Funds= 8,00,000 + 4,00,000= 12,00,000Return on Investment = Net profit  Before Interest and Tax × 100…

Continue ReadingNet Profit before Interest and Tax Rs. 4,00,000; 15% Long-term Debt Rs. 8,00,000; Shareholders’ Funds Rs. 4,00,000. Calculate Return on Investment.

Net Profit before Interest and Tax Rs. 6,00,000; Net Fixed Assets Rs. 20,00,000; Net Working Capital Rs. 10,00,000; Current Assets Rs. 11,00,000. Calculate Return on Investment.

SOLUTION Net Profit before Interest and Tax = 6,00,000Capital Employed = Net Fixed Assets + Net Working Capital= 20,00,000 + 10,00,000= 30,00,000 Return on Investment = Net profit  Before Interest and Tax…

Continue ReadingNet Profit before Interest and Tax Rs. 6,00,000; Net Fixed Assets Rs. 20,00,000; Net Working Capital Rs. 10,00,000; Current Assets Rs. 11,00,000. Calculate Return on Investment.

Calculate Return on Investment (ROI) from the following details: Net Profit after Tax Rs. 6,50,000; Rate of Income Tax 50%; 10% Debentures of Rs. 100 each Rs. 10,00,000; Fixed Assets at cost Rs. 22,50,000; Accumulated Depreciation on Fixed Assets up to date Rs. 2,50,000; Current Assets Rs. 12,00,000; Current Liabilities Rs. 4,00,000.

SOLUTION Net Fixed Assets = Fixed Assets (at cost) − Accumulated Depreciation= 22,50,000 − 2,50,000= 20,00,000 Capital Employed = Net Fixed Assets + Current Assets − Current Liabilities= 20,00,000 + 12,00,000 −…

Continue ReadingCalculate Return on Investment (ROI) from the following details: Net Profit after Tax Rs. 6,50,000; Rate of Income Tax 50%; 10% Debentures of Rs. 100 each Rs. 10,00,000; Fixed Assets at cost Rs. 22,50,000; Accumulated Depreciation on Fixed Assets up to date Rs. 2,50,000; Current Assets Rs. 12,00,000; Current Liabilities Rs. 4,00,000.

Revenue from Operations Rs. 4,00,000; Gross Profit Ratio 25%; Operating Ratio 90%. Non-operating Expenses Rs. 2,000; Non-operating Income Rs. 22,000. Calculate Net Profit Ratio.

SOLUTION Net Profit = Operating Profit + Non-Operating Incomes - Non Operating Expenses= 40,000 + 22,000 - 2,000= Rs. 60,000 Operating Profit Ratio = 100 − Operating Ratio=100 – 90=10% Operating Profit = 4,00,000 × 10%= Rs. 40,000 Net Profit Ratio = Net Profit / Revenue from operations × 100= 60,000…

Continue ReadingRevenue from Operations Rs. 4,00,000; Gross Profit Ratio 25%; Operating Ratio 90%. Non-operating Expenses Rs. 2,000; Non-operating Income Rs. 22,000. Calculate Net Profit Ratio.