When net profit is Rs. 2,25,000; taxes Rs. 25,000 and net worth Rs. 10,00,000 what is the rate of return on shareholder's equity?`
A. 22.5%
B. 20%
C. 25%
D. Cannot be calculated
Answer: Option A
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this is wrong answer the correct is 20 %
solution:
ROE=net income after tex - preference dividend (if any) / net worths
roe= (225000-25000 - 0 ) *100 / 100000
ROE= 20%