Question

Calculate Net Profit Ratio from the following information:

Revenue from Operations ₹ 25,00,000; Operating Ratio 90%; Loss on Sale of Fixed Assets ₹ 25,000; Interest on Long term Borrowings ₹ 30,000; Income from Investments ₹ 40,000.

Answer 1

Operating Profit Ratio = 100 − Operating Ratio

= 100 − 90

= 10%

Operating Profit = ₹ 25,00,000 × `10/100`

= ₹ 2,50,000

Net Profit = Operating Profit − Loss on Sale of Fixed Assets − Interest on Long term Borrowings + Non-Operating Income

= ₹ 2,50,000 − ₹ 25,000 − ₹ 30,000 + ₹ 40,000

= ₹ 2,35,000

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

= `(₹ 2,35,000)/(₹ 25,00,000) xx 100`

= 9.4%