Question

Assertion (A): Gross Profit Ratio is always higher than Net Profit Ratio.

Reason (R): To calculate Net Profit, Indirect Expenses are subtracted from Gross Profit and Indirect Incomes are added to Gross Profit.

In the context of the above two statements, which option is correct?

Options

• Assertion (A) and Reason (R) are correct, but Reason (R) is not the correct explanation of Assertion (A).

• Both Assertion (A) and Reason (R) are correct, and Reason (R) is the correct explanation of Assertion (А).

• Assertion (A) is correct, and Reason (R) is incorrect.

• Assertion (A) is not correct, but Reason (R) is correct.

Answer 1

Assertion (A) is not correct, but Reason (R) is correct.

Explanation:

1. Assertion is incorrect because Gross Profit Ratio is not always higher than Net Profit Ratio; indirect incomes may increase Net Profit Ratio beyond Gross Profit Ratio.
2. Reason is correct because Net Profit is calculated by deducting indirect expenses from Gross Profit and adding indirect incomes.