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Business Studies · 2025 · 3 marks
CBSE 2025 · Region 7 · Set 1 · Q24
Amrit Ltd. and Nimrit Ltd. are two companies manufacturingautomotive parts for automobile companies. Amrit Ltd. had acapital 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 ₹$\displaystyle 80$ lakhsdivided into $\displaystyle 80,000$ equity shares of ₹$\displaystyle 100$ each.Return on Investment (ROI) of both the companies is $\displaystyle 10$% and taxrate is $\displaystyle 50$%(a)Calculate Earning Per Share (EPS) for both the companies.(b)Which of the two companies has better Earning Per Share andwhy?
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 2025board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.