Gross Profit Ratio of a company was 25%. If credit revenue from operation was ₹20,00,000 and cash revenue from operation is 20% of total revenue. If indirect expense of the company was ₹50,000. Calculate Net Profit Ratio?
Answer & explanation
Correct answer: option 4
The correct answer is option 4- 23%.
Let total revenue from operations = a
Revenue from operations = Cash revenue from operations + Credit revenue from operations
a = 20% of a + 20,00,000
a - 20% of a = 20,00,000
a - 20a/100 = 20,00,000
(100a - 20a)/100 = 20,00,000
80a/100 = 20,00,000
a = 20,00,000 x 100/80
= 25,00,000
Thus total revenue = 25,00,000
Gross profit ratio = 25%
Gross profit ratio = Gross profit/Revenue from operations
25/100 = Gross profit/25,00,000
Gross profit = (25 x 25,00,000)/100
= ₹6,25,000
Net profit = Gross profit - Indirect expenses
= 6,25,000 - 50,000
= 5,75,000
Net profit ratio = Net profit/ Revenue from operations x 100
= 5,75,000/25,00,000 x 100
= 23%