f net profit of the firm is OMR 280,000 and capital employed is OMR 1,400, 000 the return on capital employed will be 20%. During inflation with net profit calculated with replacement cost is OMR 180,000 and capital employed is OMR 22,00,000 the return on capital employed will be 8.2%. This situation expresses the following problem.   a. Under historical cost accounting, the profits are overstated, and fixed assets are understated specially when there is increase in the price of the old fixed assets. b.   Under historical cost accounting, return on capital employed which is very useful for the valuation of the business by its owners, creditors and management will not be correct and may lead to misleading decision   c. Both the given statements are true in the given situation d.   Both the given statements are false in the given situation

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