NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Investing in Stocks (NISM XXI-A)
A company's net profit after tax is Rs 90 crore, and its average shareholders' equity is Rs 600 crore. What is its return on equity (ROE)?
Return on equity is net profit after tax divided by shareholders' equity. Here Rs 90 crore divided by Rs 600 crore gives 15%, showing the profit generated per rupee of shareholders' funds.
- A6.67%
- B15%Correct
- C10%
- D9%
Explanation
ROE = net profit / shareholders' equity = 90/600 = 15%. The 6.67% option inverts the ratio (equity/profit scaled), and 10% and 9% are arbitrary values not derived from the data.
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