Question

Gross profit ratio of a company was 25%. Its credit revenue from operations was ₹ 16,00,000 and its cash revenue from operations was 20% of the total revenue from operations. If the indirect expenses of the company were ₹ 50,000, its net profit ratio will be ______.

Options

• 27.5%

• 20%

• 22.5%

• 25%

Answer 1

Gross profit ratio of a company was 25%. Its credit revenue from operations was ₹ 16,00,000 and its cash revenue from operations was 20% of the total revenue from operations. If the indirect expenses of the company were ₹ 50,000, its net profit ratio will be 22.5%.

Explanation:

Let the Revenue from Operations be x.

Cash Revenue from Operations = `20/100 x`

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

`x` = `20/100 x + 16,00,000`

`x - 20/100 x` = 16,00,000

`80/100 x` = 16,00,000

`x` = `(16,00,000 xx 100)/80`

Revenue from Operations `(x)` = ₹ 20,00,000

Gross profit = 25% × 20,00,000

= `25/100 xx 20,00,000`

= ₹ 5,00,000

Net Profit = Gross Profit − Indirect Expenses

= 5,00,000 − 50,000

= ₹ 4,50,000

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

= `(4,50,000)/(20,00,000) xx 100`

= 22.5%