Q7-3: A company has capital employed of €1,000,000 and generates a profit after tax of €300,000. Assume the company has a balance sheet with 60% debt. What is the ROI? Now assume the company has a balance sheet with 40% debt. What is the ROI? In order to determine the answer are you doing the following? Ratios are nearly always expressed as a percentage (by multiplying the answer by 100). I know that 400,000 plus 600,000 equals 1,000,000. Please advise. Thank you.
Equity: money from shareholders1,000,000 with 60% debt
Equity 400,000 Debt 600,000Profit after tax 300,000
Return of investment 300,000/600,000=50%
Return of investment 300,000/400,000=75%