Case Study

Rahul is working with 'Soft Cell Ltd’ as a Sales Manager since 6 months. Due to the business strategies of its competitor. Techno Ltd., Soft Cell Ltd. had no option but to be taken over by Techno Ltd. The new management scanned the environment and created a policy that any employee who has been working for less than 1 year should be removed. This would improve the image of the company. Rahul was now unemployed due to the new policy. Instead of searching for a new job he decided to begins his own start-up. He spoke to many people and found out that there was great demand for flowers in the market as people gift flowers to each other on various occasions. He decided to open a store to sell floral decorations online and offline.

Rahul set up his store under the brand name of 'Nature Gift. He required 15 lakhs for the entire set up. He invested 51 akhs out of his savings and the remaining 10 lakhs, he obtained from Mr. Dus who was an investor and helped startups. He was able to sell 30,000 units in a year. His purchase cost is ₹6 per unit. Holding cost is 20% of purchase cost. Ordering cost is ₹500 per order. At the end of the year he was able to earn a net profit of ₹90,000.

Calculate ROI of 'Nature's Gift' at the end of the year.

6%

The correct answer is option (2) – 6%