Rishabh and Ritwik opened "Ostrich"- The egg café near khaoo Galli in Ghatkopar, Mumbai. They initially invested ₹20,00,000 of which ₹16,00,000 was their own investment and they borrowed ₹4,00,000 from SBI.
The sales were ₹10,00,000 & Gross Profit ₹4,00,000 with expenses being ₹2,00,000. Return on Investment for the firm will be-
Answer & explanation
Correct answer: option 3
To calculate the return on investment (ROI) for the firm, we need to determine the net profit and divide it by the initial investment.
Net profit is calculated by subtracting expenses from gross profit: Net Profit = Gross Profit - Expenses Net Profit = ₹4,00,000 - ₹2,00,000 Net Profit = ₹2,00,000
Return on Investment (ROI) is calculated by dividing the net profit by the initial investment and multiplying by 100 to get a percentage: ROI = (Net Profit / Initial Investment) * 100 ROI = (₹2,00,000 / ₹20,00,000) * 100 ROI = (0.1) * 100 ROI = 10%
Therefore, the return on investment (ROI) for the firm is 10%.