Question

If Credit Revenue from Operations is ₹ 7,00,000, Cash Revenue from Operations is ₹ 1,00,000. Cost of Revenue from Operations is ₹ 6,40,000, then Gross Profit Ratio will be ______.

Options

• 15%

• 18%

• 25%

• 20%

Answer 1

If Credit Revenue from Operations is ₹ 7,00,000, Cash Revenue from Operations is ₹ 1,00,000. Cost of Revenue from Operations is ₹ 6,40,000, then Gross Profit Ratio will be 20%.

Explanation:

Given:

Credit Revenue from Operations = ₹ 7,00,000

Cash Revenue from Operations = ₹ 1,00,000

Cost of Revenue from Operations = ₹ 6,40,000

$$\begin{aligned} \text{Total Revenue from Operations (Net Sales)} &= \text{Credit Revenue} + \text{Cash Revenue} \\ &= 7,00,000 + 1,00,000 \\ &= \mathbf{₹\ 8,00,000} \end{aligned}$$

$$\begin{aligned} \text{Gross Profit} &= \text{Total Revenue from Operations} - \text{Cost of Revenue from Operations} \\ &= 8,00,000 - 6,40,000 \\ &= \mathbf{₹\ 1,60,000} \end{aligned}$$

Now, the Gross Profit Ratio formula is:
$$\begin{aligned} \text{Gross Profit Ratio} &= \frac{\text{Gross Profit}}{\text{Total Revenue from Operations}} \times 100 \\ &= \frac{1,60,000}{8,00,000} \times 100 = \mathbf{20\%} \end{aligned}$$