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From the… (Class 12 Business Studies SQP 2024-25, Q23)

questionbuddy.in/q/cbse-12-business-studies-2024-25-sqp-q23-information-regarding-aditya-ltd-business

Business StudiesCBSE Class 12 · Sample paper, session 2024-25 · 3 marks · Short answer

CBSE Class 12 Business Studies sample paper 2024-25: question 23

From the official CBSE sample question paper for 2024-25, section B, question 23, for 3 marks. Try it first; the hints and our step-by-step solution are below.

Q23 · 3 marks · Short answerCompetency-basedFinancial Management

From the following information regarding Aditya Ltd. which is in the business of manufacturing green tea, calculate the Return on Investment and Interest Coverage Ratio of the company: (Show working)

Earning before interest and tax₹ 15,00,000
10% debentures₹ 12,00,000
Equity Share Capital (₹10 each)₹ 18,00,000
Tax Rate40%

Source: official sample paper from cbseacademic.nic.in (PDF). See it in the full Sample paper 2024-25.

Hints

Open one hint at a time and try again before the next.

Hint 1

Total investment = debt + equity.

Hint 2

Interest = 10% of the debentures; both ratios use EBIT, before tax.

Step-by-step solution

Each step shows the marks it earns, as an examiner would award them. Checked by an independent re-solve from the question paper.

  1. Total investment = 10% debentures + equity share capital = ₹12,00,000 + ₹18,00,000 = ₹30,00,000.

  2. ROI = EBIT ÷ Total investment × 100

    ½ mark

  3. = 15,00,000 ÷ 30,00,000 × 100

    ½ mark

  4. = 50%

    ½ mark

  5. Interest = 10% of ₹12,00,000 = ₹1,20,000. Interest coverage ratio = EBIT ÷ Interest

    ½ mark

  6. = 15,00,000 ÷ 1,20,000

    ½ mark

  7. = 12.5 times. (The tax rate is not needed for either ratio.)

    ½ mark

Answer: ROI = 50%; Interest coverage ratio = 12.5 times.

Where the marks are

  • ROI: formula, substitution, answer (½ each)
  • ICR: formula, substitution, answer (½ each)

Revise the chapter

Practise this chapterBoard-style questions from Financial Management, one at a time, marked against the answer key and marking points.Back to the full paperSample paper 2024-25: every question, by section.

The question is transcribed from the official paper; figures are described in words. The solution, hints and chapter tag are ours. Spotted an error? Write tosupport@questionbuddy.in.