Question

‘Sunshine Fabrics Ltd.' earned a net profit of Rs. 50,000 last year. The shareholders' equity is Rs. 2,50,000 and the company took a loan of Rs. 2,50,000. Interest on loan @ 10% per annum is Rs. 25,000.

Calculate Return on Equity (ROE) and Return on Investment (ROI) for 'Sunshine Fabrics Ltd.'

Hint:

Keep these definitions clear for your exams:

• ROE: Uses net profit divided strictly by Equity.
• ROI: Uses net profit before interest divided by Total Capital Employed (Equity + Debt).

These metrics help investors evaluate both shareholder returns and overall business efficiency.

Answer 1