Question

A firm reports: • Net sales: ₹500 lakh

• Gross profit: ₹125 lakh • Operating expenses: ₹50 lakh • Interest: ₹15 lakh • Tax: ₹20 lakh • Total assets: ₹700 lakh • Equity: ₹300 lakh You are required to compute: (a) Net profit margin (b) Return on equity (ROE) (c) Return on assets (ROA) Which of the following is correct?

A Net profit margin: 8%; ROE: 14.67%; ROA: 6.86%

B Net profit margin: 10%; ROE: 12.5%; ROA: 7.14%

C Net profit margin: 8%; ROE: 13.33%; ROA: 5.7%

D Net profit margin: 12%; ROE: 10%; ROA: 6%

E Net profit margin: 6.4%; ROE: 16%; ROA: 8%

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A firm reports: • Net sales: ₹500 lakh

Solution