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.

Options

• Both A and R are correct, and R is the correct explanation of A.

• Both A and R are correct, but R is not the correct explanation of A.

• A is correct but R is incorrect.

• A is incorrect but R is correct.

Answer 1

A is incorrect but 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.