Question 1

Calculate the Return on Equity (ROE) for Neerja International, for the year 2020 – 2021 from the details given below : Details / Amount (₹) i. Investments 10,00,000 ii. 12% Loan from State Bank of India 2,00,000 iii. 8% Debentures 2,00,000 iv. Fixed expenses per month – Salary 1,50,000; Rent 50,000; Electricity & Utilities 10,000 v. Depreciation 35,000 vi. Tax Rate 30% Monthly Sales revenue was ₹ 10,00,000 and Cost of goods sold was ₹ 4,00,000.

Accepted Answer

Given:
- Monthly Sales Revenue = ₹10,00,000
- Monthly Cost of Goods Sold = ₹4,00,000
- Investment = ₹10,00,000
- 12% Loan from SBI = ₹2,00,000
- 8% Debentures = ₹2,00,000
- Monthly Fixed Expenses: Salary ₹1,50,000; Rent ₹50,000; Electricity ₹10,000
- Monthly Depreciation = ₹35,000
- Tax Rate = 30%

**Step 1: Calculate Annual Figures**
Annual Sales = 10,00,000 × 12 = ₹1,20,00,000
Annual COGS = 4,00,000 × 12 = ₹48,00,000
Annual Fixed Expenses = (1,50,000 + 50,000 + 10,000) × 12 = ₹25,20,000
Annual Depreciation = 35,000 × 12 = ₹4,20,000
Annual Interest = (12% × 2,00,000) + (8% × 2,00,000) = 24,000 + 16,000 = ₹40,000

**Step 2: Calculate Profit Before Tax**
= Sales − COGS − Fixed Expenses − Depreciation − Interest
= 1,20,00,000 − 48,00,000 − 25,20,000 − 4,20,000 − 40,000
= ₹42,20,000

**Step 3: Calculate Tax and Net Profit**
Tax = 30% × 42,20,000 = ₹12,66,000
Net Profit After Tax = 42,20,000 − 12,66,000 = ₹29,54,000

**Step 4: Calculate Equity**
Equity = Total Investment − Loan − Debentures
= 10,00,000 − 2,00,000 − 2,00,000 = ₹6,00,000

**Step 5: Calculate ROE**
ROE = (Net Profit After Tax / Equity) × 100
= (29,54,000 / 6,00,000) × 100
= **492.33%**

Question 2

MM Ltd. is a renowned name in manufacturing hand puppets for children. Its two most selling varieties are Alphabets and Domestic animals. Sales price/unit: Alphabets Rs.210, Domestic Animals Rs.360. Variable Cost/unit: Alphabets Rs.140, Domestic Animals Rs.190. Sales mix: 40% Alphabets, 60% Domestic Animals. The fixed expenses of MM Ltd. is Rs.75,000. The weighted contribution for the two products will be:

Accepted Answer

(D) Rs. 130

Question 3

Ryan started a mask manufacturing business with his Brother. With planning and hard work, they were able to sell 5000 masks in the first year. But they did not earn any profit. Both were happy because they were not at loss either and the revenue generated was equal to the cost. Now they were moving towards earning profit in the second year. Out of the following, identify the component of the financial plan discussed above.

Accepted Answer

(B) Break-even point

Question 4

Karuna manufactures hair oil through her company Glider oils. Net income earned = Rs.8,40,000, Equity = Rs.4,00,000. Return on equity will be:

Accepted Answer

(A) 210%

Question 5

The Fancy Store, a ready-made garments retail shop sold 10,000 shirts at Rs.400 per shirt during the year. Cost of placing an order and receiving goods is Rs.2,000 per order. Inventory holding cost is Rs.1000 per year. Calculate the Economic Order Quantity for The Fancy Store.

Accepted Answer

(A) 200

Business Arithmetic

Study Simplify Special