Return on Investment %
Net Profit B.T. + interest paid
(paid less capitalised) X 100
(FA + CA -
CL) + Bank Overdraft + S.T. Bond Payments + Others S.T. Loans
before interest payments as a percentage of the investment in the business
(capital employed plus short term borrowing).
ration shows the combined profit made on the capital tied up in the company by
both assets owned by the company and those funded via bank overdraft and other
short term borrowing.
effect it is simply a modified return on capital employed model. See return on
capital employed, also relate this to gearing.