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Business Studies · 2026 · 4 marks
CBSE 2026 · Region 5 · Set 1 · Q27
‘Ratan Ltd.’ and ‘Lara Ltd.’ are two companies with each having a capital
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employed of $\displaystyle 20,00$,000. ‘Ratan Ltd.’ had raised funds by issuing shares
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whereas ‘Lara Ltd.’s’ capital has $\displaystyle 60$% equity (in shares of $\displaystyle 100$ each) and
% debt (comprising of $\displaystyle 8$% debentures). Both the companies have a
Return on Investment of $\displaystyle 10$% and the tax rate is $\displaystyle 40$%.
State with reason which company will be able to give a better return to
the shareholders. Show your calculations clearly.
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Marking-scheme solution
Workings:
Share Capital (of ₹$\displaystyle 100$ each) $\displaystyle 20,00,000$ $\displaystyle 12,00,000$
$\displaystyle 8$% Debentures - $\displaystyle 8,00,000$
Capital Employed $\displaystyle 20,00,000$ $\displaystyle 20,00,000$
Lara Ltd. will be able to give better returns to the shareholders.
Reason: Due to presence of debt in capital structure and Return On
Investment being higher than the cost of debt, Lara Ltd. will be able to give
higher returns to its shareholders.
| Details | Ratan Ltd. (₹) | Lara Ltd. (₹) |
| Earnings Before Interest and Tax | $\displaystyle 2,00,000$ | $\displaystyle 2,00,000$ |
| Less: Interest @ $\displaystyle 8$% p.a. | - | $\displaystyle (64,000)$ |
| Earnings Before Tax | $\displaystyle 2,00,000$ | $\displaystyle 1,36,000$ |
| Less: Tax @ $\displaystyle 40$% | $\displaystyle (80,000)$ | $\displaystyle (54,400)$ |
| Earnings After Tax | $\displaystyle 1,20,000$ | $\displaystyle 81,600$ |
| Earnings Per Share = Earnings After Tax No. of shares | = $\displaystyle 1,20,000$ $\displaystyle 20,000$ = $\displaystyle 6$ | = $\displaystyle 81,600$ $\displaystyle 12,000$ = $\displaystyle 6.8$ |
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CBSE Class 12 Business Studies past-paper question from the 2026board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.