'Tech Supplies Ltd.' sells bluetooth speakers and needs to maintain a smooth supply to meet customer demand. Annual quantity of bluetooth speakers sold by the company is 2500 units. Cost of placing an order and receiving the bluetooth speakers is ₹ 50 per order. Inventory holding cost per unit is ₹ 25 per annum. Calculate the Economic Order Quantity (EOQ) for 'Tech Supplies Ltd.' 'Sunshine Fabrics Ltd.' earned a net profit of ₹ 50,000 last year. The shareholders' equity is ₹ 2,50,000 and the company took a loan of ₹ 2,50,000. Interest on loan @ 10% per annum is ₹ 2,500. Calculate Return on Equity (ROE) and Return on Investment (ROI) for 'Sunshine Fabrics Ltd.'

Question

Accepted Answer

**Part 1: EOQ for Tech Supplies Ltd.**

Given:
- Annual Demand (D) = 2,500 units
- Cost of placing an order (P) = ₹50 per order
- Inventory Holding Cost per unit (C) = ₹25 per annum

EOQ = √((2 × P × D) / C)
= √((2 × 50 × 2,500) / 25)
= √(2,50,000 / 25)
= √10,000
= **100 units**

The Economic Order Quantity for Tech Supplies Ltd. is **100 units**.

**Part 2: ROE and ROI for Sunshine Fabrics Ltd.**

Given:
- Net Profit = ₹50,000
- Shareholders' Equity = ₹2,50,000
- Loan = ₹2,50,000

Total Investment = Equity + Loan = 2,50,000 + 2,50,000 = ₹5,00,000

**Return on Equity (ROE):**
ROE = (Net Profit / Equity) × 100
= (50,000 / 2,50,000) × 100
= **20%**

**Return on Investment (ROI):**
ROI = (Net Profit / Total Investment) × 100
= (50,000 / 5,00,000) × 100
= **10%**

The ROE is 20% and the ROI is 10%. The higher ROE compared to ROI indicates that Sunshine Fabrics Ltd. is effectively using borrowed funds to enhance returns for equity holders.