Gross profit ratio of a company was 25%. Its credit revenue from operations was ₹20,00,000 and its cash revenue from operations was 20% of the total revenue from operations. If the indirect expenses of the company were ₹50,000, Calculate its net profit.
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Rs. 5,75,000
Cash revenue is given as a percentage of total revenue, so credit revenue is the remaining 80% of the total. Find the total first, then the gross profit, and deduct the indirect expenses to reach net profit.
Credit revenue = 80% of total revenue = Rs. 20,00,000
Total revenue from operations = Rs. 20,00,000 × 100/80 = Rs. 25,00,000
Cash revenue = Rs. 25,00,000 − Rs. 20,00,000 = Rs. 5,00,000
Gross profit = 25% of Rs. 25,00,000 = Rs. 6,25,000
Net profit = Rs. 6,25,000 − Rs. 50,000 = Rs. 5,75,000
Taking cash revenue as 20% of the credit revenue (Rs. 4,00,000) is the usual slip; the question ties it to the total.
NCERT (2026-27 edition):
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