Return on investment (capital employed): Class 12 practice
Return on investment = profit before interest and tax ÷ capital employed × 100. Read the method, follow the three worked examples, then try the six questions.
What you should know first
- Percentages
The idea behind return on investment (capital employed)
Return on investment = profit before interest and tax ÷ capital employed × 100. Capital employed = shareholders' funds + non-current liabilities (or total assets − current liabilities).
Step-by-step method
- Find PBIT: add back interest and tax to net profit if needed.
- Find capital employed.
- ROI = PBIT ÷ capital employed × 100.
Worked example 1 (Basic)
PBIT ₹4,35,000, capital employed ₹29,00,000. Find ROI.
- 435000 ÷ 2900000 × 100
- Answer: 15%
Worked example 2 (Standard)
Net profit after tax ₹5,55,000, interest ₹40,000, tax ₹30,000, capital employed ₹25,00,000. Find ROI.
- PBIT = ₹6,25,000
- ROI = 25%
- Answer: 25%
Worked example 3 (Challenge)
Equity ₹15,00,000, long-term loan ₹4,00,000, PBIT ₹2,85,000. Find capital employed and ROI.
- CE = ₹19,00,000
- ROI = 15%
- Answer: ₹19,00,000, 15%
Common mistakes and misconceptions
- Using net profit after interest
- Including current liabilities in capital employed
Practice questions
- (Basic) PBIT ₹60,000, capital employed ₹6,00,000. Find ROI.
- (Basic) PBIT ₹6,25,000, capital employed ₹25,00,000. Find ROI.
- (Standard) Net profit after tax ₹1,80,000, interest ₹10,000, tax ₹50,000, capital employed ₹12,00,000. Find ROI.
- (Standard) Net profit after tax ₹1,90,000, interest ₹20,000, tax ₹30,000, capital employed ₹16,00,000. Find ROI.
- (Challenge) Equity ₹4,00,000, long-term loan ₹3,00,000, PBIT ₹56,000. Find capital employed and ROI.
- (Challenge) Equity ₹12,00,000, long-term loan ₹1,00,000, PBIT ₹1,95,000. Find capital employed and ROI.
Answer key with full working
- Q1: 60000 ÷ 600000 × 100 → Answer: 10%
- Q2: 625000 ÷ 2500000 × 100 → Answer: 25%
- Q3: PBIT = ₹2,40,000 → ROI = 20% → Answer: 20%
- Q4: PBIT = ₹2,40,000 → ROI = 15% → Answer: 15%
- Q5: CE = ₹7,00,000 → ROI = 8% → Answer: ₹7,00,000, 8%
- Q6: CE = ₹13,00,000 → ROI = 15% → Answer: ₹13,00,000, 15%
Syllabus note
This skill is listed under "Accounting Ratios" for Class 12 in the NCERT/CBSE books. ICSE, IGCSE, IB and state boards may teach it in a different chapter or year.
Answers on this page are generated and automatically re-checked by a second, independent calculation. They have not been reviewed by a teacher — if you spot a problem, tell us on WhatsApp.
Related practice and notes
- Current ratio and quick ratio
- Debt–equity ratio
- Inventory turnover ratio
- Gross profit and net profit ratios
- Trade receivables turnover
- Working capital and its turnover
- Interest on capital and drawings
- New and sacrificing ratio on admission
- Gaining ratio on retirement
- Valuation of goodwill
- All Class 12 practice
Frequently asked questions
Which chapter is return on investment (capital employed) in?
"Accounting Ratios", Class 12 Accountancy (NCERT/CBSE). Other boards may place it differently.
How were the answers checked?
Answers on this page are generated and automatically re-checked by a second, independent calculation. They have not been reviewed by a teacher — if you spot a problem, tell us on WhatsApp.