NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Investing in Stocks (NISM XXI-A)
A company has net profit after tax of ₹90 crore, and average shareholders' equity of ₹600 crore. It has 10 crore shares outstanding. What is its return on equity (ROE) and book value per share, assuming closing equity equals ₹600 crore?
ROE is 15% and book value per share is ₹60. ROE equals profit of ₹90 crore divided by equity of ₹600 crore, while book value per share is equity of ₹600 crore divided by 10 crore shares. The figure ₹9 is the EPS, not book value.
- AROE 15%; book value ₹60Correct
- BROE 15%; book value ₹9
- CROE 6.67%; book value ₹60
- DROE 6.67%; book value ₹9
Explanation
ROE = 90/600 = 15%. Book value per share = 600 crore / 10 crore shares = ₹60. Check: 60 x 10 crore = ₹600 crore. ₹9 is actually EPS (90/10), and 6.67% inverts the ROE ratio (600/90 scaled).
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