Q.From the same figures (Net Sales ₹10,00,000; Net Profit ₹1,60,000, taken here as Net Profit before Interest and Tax since no separate interest/tax figures are given) and the Balance Sheet given in Practical Problem 3 above (Shareholders' Fund ₹3,00,000; 10% Debentures ₹1,25,000), compute the Return on Investment (ROI).

ROI relates profit BEFORE interest and tax to the TOTAL long-term capital employed, regardless of who supplied it.

Step 1 — Capital Employed:

Capital Employed = Shareholders' Fund + Long-term Debt = 3,00,000 + 1,25,000 = ₹4,25,000.

Step 2 — Net Profit before Interest and Tax:

Since neither debenture interest nor income tax has been separately deducted anywhere in the Trading and Profit & Loss Account figures used across these problems, the given Net Profit of ₹1,60,000 already represents Net Profit BEFORE Interest and Tax — no adjustment is needed.

Step 3 — Return on Investment:

ROI = (Net Profit before Interest and Tax ÷ Capital Employed) × 100 = (1,60,000 ÷ 4,25,000) × 100 = 37.647...% ≈ 37.65%. …

As a cross-check, 4,25,000 × 37.65% = ₹1,60,013 (rounding difference only, from the recurring dec …

A common error is using Total Assets (₹5,00,000) instead of Capital Employed (₹4,25,000) as the denominator — Capital Employed specifically excludes Current Liabilities (here, ₹75,000), since those are short-term, not long-term, sources of finance. Another common slip is deducting intere …