For calculating RETURN ON CAPITAL EMPLOYED sanjay sir told us 3 formulae I.e 1. EBIT×100÷capital employed
2. EBIT(1-T)×100÷Capital employed
3. PAT×100÷ CAPITAL EMPLOYED
And someone in the lecture suggested the 4th formula I.e
(PAT+Interest)×100÷CAP EMPLOYED
And sir told this is the most correct formula but not used by institute so avoid using it in exam
But in ICAI module although they have have used first 2 formulae as told by sanjay sir but I was not able to find 3rd formula in icai material….. instead they have stated THE FORMULA THAT WAS SUGGESTED BY THAT STUDENT I.E
(PAT+Interest)×100÷CAP EMPLOYED
…..So should I go with ICAI module
All the 4 formulas can be used.
But mostly(90℅ of time) the 1st one is used.