Question

A company has Net Sales of ₹1,000 lakhs, Net Profit of

Q: Answer-A company has Net Sales of ₹1,000 lakhs, Net Profit of ₹80 lakhs, Total Assets of ₹750 lakhs, and Eq...

ROE Net Profit Sales Sales Assets Assets Equity 801000 1000750 750250 0.08 1.33 3 31.92 32 High leverage 2 equity is the key multiplier Option C

₹80 lakhs, Total Assets of ₹750 lakhs, and Equity of ₹250 lakhs. Calculate Return on Equity (ROE) using the DuPont formula and identify the major driver of profitability.

A 16% – driven by net profit margin

B 20% – driven by asset turnover

C 32% – driven by high leverage

D 40% – driven by both margin and turnover

E 25.6% – driven mainly by high profit margin and moderate turnover

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A company has Net Sales of ₹1,000 lakhs, Net Profit of

Solution