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    Question

    XYZ Ltd. has the following details: Equity Share Capital

    = ₹50 lakhs, Reserves = ₹20 lakhs, Long-term Debt = ₹30 lakhs. EBIT for the year is ₹18 lakhs, and interest expense is ₹4 lakhs. Calculate the Return on Capital Employed (ROCE) and suggest if the capital is efficiently used.
    A 20% – Efficient Correct Answer Incorrect Answer
    B 18% – Efficient Correct Answer Incorrect Answer
    C 15% – Inefficient Correct Answer Incorrect Answer
    D 12% – Inefficient Correct Answer Incorrect Answer

    Solution

    ROCE = EBIT / (Equity + Reserves + Debt) = ₹18L / ₹100L = 18%, which is considered efficient above 15%.

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