Return on Investment is

Return on Investment measures the earning capacity of the total capital employed in the business.

Formula: $\text{Return on Investment} = \frac{\text{Net Profit before Interest and Tax}}{\text{Capital Employed}} \times 100$

Calculating Net Profit before Interest and Tax:

Net Profit After Tax = Rs. 1,50,000

Add: Tax = Rs. 50,000

Net Profit Before Tax = Rs. 2,00,000

Interest on 10% Debentures = 10% of Rs. 4,00,000 = Rs. 40,000

Net Profit before Interest and Tax = Rs. 2,00,000 + Rs. 40,000 = Rs. 2,40,000

Calculating Capital Employed:

Total Assets = Fixed Assets + Current Assets

= Rs. 9,50,000 + Rs. 2,34,000 = Rs. 11,84,000

Capital Employed = Total Assets - Current Liabilities

= Rs. 11,84,000 - Rs. 1,00,000 = Rs. 10,84,000

Return on Investment:

= $\frac{2,40,000}{10,84,000} \times 100$

= 22.14%

Note: Interest on debentures must be added back to find the profit generated by all capital employed, regardless of its source. Current liabilities are excluded from capital employed as they represent short-term obligations, not long-term capital invested in the business.