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Question
State whether following statement is true or false :
ROI is calculated on ownership capital only.
Options
True
False
Solution
False
Explanation: ROI, i.e. return on investment, is calculated on total capital employed which is total of ownership capital and debt capital.
Capital Employed = Share Capital + Reserves & Surplus + Long-Term Loans + Debentures – Preliminary Expenses
Alternatively,
Capital Employed = Net Fixed Assets + Long-Term Investments + Working Capital.
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