Multiple choice

Directions: Choose the correct option for the given question.

Net profit after tax of Rs. 2,00,000 is Rs. 4,00,000. Share capital is Rs. 8,00,000 and revenue reserve is Rs. 2,00,000. What is the rate of return on equity?

  1. 40%

  2. 50%

  3. 60%

  4. 75%
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The question contains OCR errors in the profit figure. Return on equity = Net Profit after tax / Shareholders' Equity. Equity = Share Capital + Revenue Reserves = Rs. 8,00,000 + Rs. 2,00,000 = Rs. 10,00,000. Using the answer of 40%, we can back-calculate that Net Profit after tax should be Rs. 4,00,000 (40% of Rs. 10,00,000). The text incorrectly states 'Rs. 2,00,000 is Rs. 4,00,000' - the first number appears to be a scanning error.

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