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Business Studies · 2025 · 3 marks
CBSE 2025 · Region 7 · Set 1 · Q24
Amrit Ltd. and Nimrit Ltd. are two companies manufacturing automotive parts for automobile companies. Amrit Ltd. had a capital employed of ₹80 lakhs…
Amrit Ltd. and Nimrit Ltd. are two companies manufacturing
automotive parts for automobile companies. Amrit Ltd. had a
capital employed of ₹$\displaystyle 80$ lakhs comprising of equity share capital of
₹$\displaystyle 40$ lakhs divided into $\displaystyle 40,000$ shares of ₹ $\displaystyle 100$ each and debt of ₹$\displaystyle 40$
lakhs at $\displaystyle 6$%. Nimrit Ltd. also had capital employed of ₹$\displaystyle 80$ lakhs
divided into $\displaystyle 80,000$ equity shares of ₹$\displaystyle 100$ each.
Return on Investment (ROI) of both the companies is $\displaystyle 10$% and tax
rate is $\displaystyle 50$%
(a)
Calculate Earning Per Share (EPS) for both the companies.
(b)
Which of the two companies has better Earning Per Share and
why?
Marking-scheme solution
(a)
Calculation of Earning Per Share
| Particulars | Amrit Ltd. | Nimrit Ltd. |
| Capital employed | ₹$\displaystyle 80$ lakhs | ₹$\displaystyle 80$ lakhs |
| Equity share capital | ₹$\displaystyle 40$ lakhs ($\displaystyle 40,000$ shares @₹$\displaystyle 100$ each) | ₹$\displaystyle 80$ lakhs ($\displaystyle 80,000$ shares @ ₹$\displaystyle 100$ each) |
| $\displaystyle 6$% Debt | ₹$\displaystyle 40$ lakhs | --------- |
| ROI | $\displaystyle 10$% | $\displaystyle 10$% |
| Earnings Before Interest and Tax(EBIT) | ₹$\displaystyle 8,00,000$ | ₹$\displaystyle 8,00,000$ |
| Less : Interest on debt($\displaystyle 6$%) | ₹$\displaystyle 2,40,000$ | ---------- |
| Earnings Before Tax (EBT) | ₹$\displaystyle 5,60,000$ | ₹$\displaystyle 8,00,000$ |
| Less: Tax @$\displaystyle 50$% | ₹$\displaystyle 2,80,000$ | ₹$\displaystyle 4,00,000$ |
| Earnings After Tax (EAT) | ₹$\displaystyle 2,80,000$ | ₹$\displaystyle 4,00,000$ |
| Earning Per Share(EPS) =EAT/Number of equity shares | ₹$\displaystyle 7$ per share ($\displaystyle 2,80,000$/$\displaystyle 40,000$) | ₹$\displaystyle 5$ per share ($\displaystyle 4,00,000$/$\displaystyle 80,000$) |
($\displaystyle 40,000$ shares ($\displaystyle 80,000$ shares @₹$\displaystyle 100$ each) @ ₹$\displaystyle 100$ each)
(b)
Amrit Ltd has better Earning Per Share as compared with
Nimrit Ltd. The use of debt by Amrit Ltd. has increased the
EPS because ROI of Amrit Ltd. is $\displaystyle 10$%, which is greater than
its rate of interest on debt ($\displaystyle 6$%).
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CBSE Class 12 Business Studies past-paper question from the 2025 board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.