How did we get return on total capital, please explain and how we got it Questio

Question

How did we get return on total capital, please explain and how we got it Question 9: Ratio analysis Great World Trading Limited, a company listed on the Unintelligent Stock Exchange, is a trading and investment entity. The company trades exclusively in running equipment and invests in property and other firms. You are considering investing into Great World Trading Limited. The company has provided you the financial statements (i.e., income statement and balance sheet) for 2027 and 2028. Income Statement December 31, 2027 December 31, 2028 $212,500,000.00 $99,752,000,00 $112,748,000.00 Sales Revenue $201,561,025.00 $94,972,000.00 $1 06,589,025.00 Cost of Goods Sold Gross Profit Selling and Distribution Expenses -$41,598,000.00 -$24,001,000.00 $5,605,000.00 $2,580,010.00 S6,842,510.00 $1.400,000.00 $49,457,525.00 -$48,175,000.00 -$25,089,000.00 $10,578,000.00 $15,824,500.00 $4,589,200.00 $2,000,000.00 $36,826,700.00 Administrative Expenses Other Income Gain (Loss) on Sale of Land Gain (Loss) Sale of Equipment Impairment Loss Operating Profit Finance Income Finance Costs S2,453,000.00 -$19,890,000.00 -$12,437,000.00 6,505,000.00 $8,540,000.00 $7,035,000.00 Finance Costs (Net) Share of Net Gain (Loss) from Associates Share of Net Gain (Loss) from Joint Venture -$4,287,000.00 S6,542,000.00 $25,069,000.00 S5,891,000.00 Profit Before Income Tax S57,802,525.00 -$14,450,631.25 $43,351,893.75 $30,442,700.00 -$7,610,675.00 $22,832,025.00 Income Tax Net Income

Explanation / Answer

2027

Return on total capital=

Earning before interest and tax/total capital

$57,802,525*100/2,383,116,162

2.43%

Note*

Total capital=short term debt+long term debt+shareholders equity

=$125,480,000+$10,500,000+$1,245,001,000+$1,002,135,162

=$2,383,116,162

Return on capital for year 2028=

$30,442,700*100/$2,400,038,091

1.27%

Note*

Total capital=

$1,05,480,000+$9,500,000+$1,345,001,000+$940,057,091

$2,400,038,091

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