Study the Pie charts given below which shows the operating profit of a business for two years. On the basis of these pie charts answer the following questions.
If on an average 20% rate of interest was charged on borrowed funds, then the total borrowed funds used by the company in the given 2 years amounted to :
Answer & explanation
Correct answer: option 4
From the pie charts:
1990–91
- Operating Profit = ₹130 lakh
- Interest = 30% of ₹130 lakh
$= \frac{30}{100} \times 130 = 39 \text{ lakh}$
- If the rate of interest = 20%, then borrowed funds:
$\frac{39}{0.20} = 195 \text{ lakh}$
1991–92
- Operating Profit = ₹160 lakh
- Interest = 40% of ₹160 lakh
$= \frac{40}{100} \times 160 = 64 \text{ lakh}$
- Borrowed funds:
$\frac{64}{0.20} = 320 \text{ lakh}$
Total borrowed funds in the two years
$195 + 320 = 515 \text{ lakh}$