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Ho we calculate capital employed & ROI ?

ashu's (student) (78 Points)

09 October 2010

How we calculate capital employed & return on investment (ROI) in these two cases ?

1) PBIT : Rs. 1 Cr., Capital : Rs. 5 Lac, Reserve : Rs. 12 Lac, Loans : Rs. 2.0 Cr, Losses from previous year Rs. 85 Lac.

2) Loss from current year : Rs 50 Lac, Capital : Rs 5 Lac, Reserve Rs 12 Lac, Loans : Rs 1.4 Cr, Losses from previous year : Rs. 36 Lac. Current year sales : 1.4 Lac & All trade expenses : 1.86 Cr.

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3 Replies

C.A. LINESH PATIL (CA) (910 Points)
Replied 09 October 2010

for calculating capital employed owner + long term loaner fund which has been employed in business is taken.

and ROI is calculated for share holder alone while ROCE is calculated for business that means for owner as well as loaner.

1)for calculating ROI we need to deduct interest on long term fund to arrive share holder income and then this is divide by share holder fund.(and in your question you did not provide amount of interest)

here in 1st situation you can calculate ROCE which is calculated for both you may say for business earning capacity.

for this EBIT/capital employed

1.ROCE is in you given case 1 crore/1.32 crore =75.75%

and for second case no ROI or ROCE as no income there

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ashu's (student) (78 Points)
Replied 09 October 2010

Loan amount excluding interest. we have to calcuate ROI only in these two cases. And one more thing for calculating capital employed can we add profit from previous years or not.

ujjwal goyal (CA FINAL,CS EXECUTIVE) (48 Points)
Replied 11 August 2012

please tell me that why sundry assets does not include preliminary expeses,losses and non trade inestments and why sundry liavilities does not contain proposed dividend & preference share capital in it??????????????????

please reply me as soon as possible..............plzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz