The return to equity is $75000
Another form of financial ratio is the return on equity. Financial ratios are data taken from a firm's financial statements and used to predict and draw specific conclusions about the organization.
Relative return on equity is a tool used to forecast a company's profitability. It evaluates how effectively people employed in any business have used the money that has been invested.
Since the farm has Nfio of $100,000 and an opportunity cost total of $25,000.
Therefore,
Return on equity -
Net Farm Income from Operations - Opportunity cost
= 1,00,000 - 25,000
= 75,000
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