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Target Exam

CUET

Subject

-- Accountancy Part B

Chapter

Accounting Ratios

Question:

Read the following passage and answer the question.

ABC Ltd has a business of shoes in New Delhi. From the last year, profits of the company has reduced so the company wants to know the earning capacity and liquidity position of its company so that it can take correct measures. Following information is available to the company.

1) Cash revenue from operations was 1/3rd of total revenue from operations
2) Cash revenue from operations was ₹1,40,000
3) Cash purchase was 25% of credit purchase
4) Cash purchase was ₹50,000
5) Opening inventory ₹30,000
6) Closing inventory was ₹10,000 more than opening inventory
7) Carriage inwards is ₹12,000 & Non current liabilities is ₹80,000
8) Total assets is ₹8,00,000 & fixed assets is ₹5,40,000
9) Non-current investments ₹1,10,000 & Shareholders funds ₹6,00,000

 

Find out the gross profit ratio of the company.

Options:

20%

30%

35%

40%

Correct Answer:

40%

Explanation:

The correct answer is option 4- 40%.

Cost of revenue from operations = Opening inventory + Purchase + Carriage - Closing Inventory
                                                = 30,000 + 2,50,000 + 12,000 - 40,000
                                                = ₹2,52,000

Gross profit = Total revenue from operations -  Cost of revenue from operations
                  = 4,20,000 - 2,52,000
                  = ₹1,68,000

Gross profit ratio = Gross profit / Revenue from operations X 100
                         = 1,68,000/4,20,000 X 100
                        = 40%

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