READ THE FOLLOWING PASSAGE AND ANSWER THE FOLLOWING QUESTION.
The profit of a company is ₹90.000 after taking into account the following items:
| Particulars | Beginning of the year (₹) | End of the year (₹) |
| Bills Receivables | 40,000 | 50,000 |
| Creditors | 30,000 | 50,000 |
| Debtors | 50,000 | 30,000 |
| * Patents written off ₹40,000 |
| * Profit on sale of fixed assets ₹10,000 |
| * Depreciation on fixed assets ₹40,000 |
| * Interest paid on debentures ₹40,000 |
Calculate the operating profit of the company before its working capital changes.
Answer & explanation
Correct answer: option 2
The correct answer is option 2- ₹2,00,000.
Operating profit before working capital changes:
Net profit before tax and extraordinary items = ₹90,000
+ patents written off= 40,000
+ Depreciation = 40,000
+ Interest on debentures= 40,000
Total = 90,000 + 40,000 + 40,000 +40,000
= ₹2,10,000
- profit on the sale of fixed asset = 10,000
OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES = 2,10,000 - 10,000
= ₹2,00,000