Question

The following information relates to the newly established Boutique – ‘The Pearl’:

• Total capital invested - ₹ 40,00,000 out of which ₹ 20,00,000 is a bank loan at 15% per annum.
• Net Profit after Tax is ₹ 6,00,000.

Calculate Return on Equity for The Pearl Boutique.

Answer 1

Return on Equity = `("Net Profit after Tax")/("Total Equity")xx100`

= `(6,00,000)/(20,00,000)xx100`

= 30%