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- This topic has 3 replies, 2 voices, and was last updated 1 year ago by John Moffat.

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- May 27, 2021 at 7:36 pm #621954
Can you please state whether there is any specific formula to calculate return on investment (r) in the given formula g = br

Is this true that there are many ways to calculate return on investment depending on the information given in the question.

There are few ways that I calculate return on investment such as:

1) PBIT / Capital Employed

2) PAT / Capital Employed

3) EPS / Net AssetsIf you know any other way to calculate return on investment then please do share some with me

Secondly, is this correct that Capital Employed / Equity / Net Assets are all the same things but many names which is calculated as Total Assets – Total Liabilities = Equity

Thanks 🙂

May 28, 2021 at 8:31 am #622000How you estimate the return on investment for this purpose depends on the information given in the question.

Capital employed is the total long-term capital, which is equity plus non-current liabilities (which is also equal to total assets less current liabilities).

May 28, 2021 at 5:36 pm #622074But the ratios that I provided in my last response are all correct or not to calculate return on investment if the information was given in the question relating to them?

However, as you said different ratios can be calculated depending on the information given in the question.

Secondly, I assume that my second query related to Capital Employed / Equity / Net Assets are all being the same thing is CORRECT (let me know please)

I appreciate your effort. May you have the best of life!

May 29, 2021 at 8:52 am #622134Yes, the ratios you gave are all possible.

Capital employed, equity and net assets are not all the same thing and I make that clear in the second sentence of my previous reply!!!!!

Given that capital employed is equity plus non-current liabilities, then it is obviously not the same thing as equity. Given that it is also equal to total assets less current liabilities, it is obviously not equal to net assets!!!

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