Question

Gross Profit ratio of a Company was 25%. Its cash Revenue from Operations were ₹ 5,00,000 and its credit Revenue from Operations were 90% of the total Revenue from Operations. If the indirect expenses of the company were ₹ 1,50,000, calculate its net profit ratio.

Answer 1

Let the Total Revenue from Operations be x.

Total Revenue from Operations = Cash Revenue from Operations + Credit Revenue from Operations

x = ₹ 5,00,000 + `90/100` x

x − `90/100` x = ₹ 5,00,000

`10/100` x = ₹ 5,00,000

x = `(₹ 5,00,000 xx 100)/10`

x (Total Revenue from Operations) = ₹ 50,00,000

Gross Profit Ratio = `"Gross Profit"/"Revenue from Operations" xx 100`

25 = `"Gross Profit"/(₹ 50,00,000) xx 100`

Gross Profit = `(₹ 50,00,000 xx 25)/100`

= ₹ 12,50,000

Net Profit = Gross Profit − Indirect Expenses

= ₹ 12,50,000 − ₹ 1,50,000

= ₹ 11,00,000

Net Profit Ratio = `"Net Profit"/"Revenue from Operations" xx 100`

= `(₹ 11,00,000)/(₹ 50,00,000)xx 100`

= 22%