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Question
Assertion (A): If Gross Profit Ratio is 25%, sale of goods for ₹ 2,00,000 will increase the ratio.
Reason (R): There will be no change in Gross Profit Ratio because Gross Profit will increase by the same percentage i.e., 25%.
In the context of the above statements, which of the following is correct?
Options
Both (A) and (R) are true, but (R) is not the correct explanation of (A).
Both (A) and (R) are true and (R) is the correct explanation of (A).
Both (A) and (R) are false.
(A) is false, but (R) is true.
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Solution
(A) is false, but (R) is true.
Explanation:
If the Gross Profit Ratio is 25%, additional sales will increase gross profit in the same proportion (25% of sales), keeping the ratio constant. As a result, the assumption that the ratio will increase is incorrect, but the reason is that the ratio will not change.
