Question

From the following calculate

(a) Net Profit Ratio

(b) Operating Profit Ratio

$\begin{array}{ccc}\text{S.No.}& Items& AmountRs.\\ 1.& \text{Revenue from Operations (Sales)}:& 2,00,000\\ 2.& \text{Gross Profit}& 75,000\\ 3.& \text{Office Expenses}& 15,000\\ 4.& \text{Selling Expenses}& 26,000\\ 5.& \text{Interest on Debentures}& 5,000\\ 6.& \text{Accidental losses}& 12,000\\ 7.& \text{Income from Rent}& 2,500\\ 8.& \text{Commission received}& 2,000\end{array}$

Answer 1

(a) Net Profit Ratio = $\frac{\text{Net Profit}}{\text{Revenue from Operations}}\times 100$

Net Profit = Gross Profit - Indirect Expenses & Losses + Other Incomes

Indirect Expenses and Losses = Office Expenses + Selling Expenses + Interest on Debentures + Accidental Losses

= Rs. 15,000 + Rs. 26,000 + Rs. 5,000 + Rs. 12,000

= Rs. 58,000

Other Incomes = Income from Rent + Commission Received

= Rs. 2,500 + Rs. 2,000 = Rs. 4,500

Net Profit = Rs. 75,000 - Rs. 58,000 + Rs. 4,500 = Rs. 21,500

Revenue from Operations = Rs. 2,00,000

$\therefore$ Net Profit Ratio = $Rs.\frac{21,500}{2,00,000}\times 100=10.75$

(b) Operating Profit Ratio = $\frac{\text{Operating Profit}}{\text{Revenue from Operations}}\times 100$

Operating Profit = Gross Profit + Operating Income - Operating Expenses

Operating Income = Commission Received

= Rs. 2,000

Operating Expenses = Office Expenses + Selling Expenses

= Rs. 15,000 + Rs. 26,000 = Rs. 41,000

$\therefore$ Operating Profit = Rs. 75,000 + Rs. 2,000 - Rs. 41,000 = Rs. 36,000

Revenue from Operations = Rs. 2,00,000

$\therefore$ Operating Profit Ratio = $Rs.\frac{36,000}{2,00,000}\times 100=18\%$