Read the following information and answer the question.
Trade Receivables Turnover Ratio = 4 times
Gross Profit Ratio = 20%
Gross Profit for the year was ₹5,00,000
Bills Receivables = ₹60,000
Net Profit (after) Tax Ratio 12%
Tax Rate is 50%
10% Long-term Borrowings = ₹12,00,000
Shareholders' Funds are ₹ 4,00,000
Non-current Liabilities are ₹18,00,000
Sale of goods on credit only.
Calculate net profit after tax.
Answer & explanation
Correct answer: option 2
The correct answer is option 2- ₹3,00,000.
Gross profit = 20%
20% = ₹5,00,000
So, sales = 5,00,000 x 100/20
= ₹25,00,000
Net Profit Ratio = Net profit/Revenue from Operations × 100
12 = (Net profit/ 25,00,000)X 100
Net profit = (25,00,000 x 12)/100
= ₹3,00,000