What Will Be the Effect of Purchase of Goods for Cash < 3,000 on Gross Profit Ratio?

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Solution

Purchasing a good denotes decrease in the cash, therefore it will decrease the gross profit margin and subsequently decrease the gross profit ratio.
Also read:
Debt to Asset Ratio
Debt to Equity Ratio
Difference Between Current Ratio and Quick Ratio
Net Profit Ratio
Operating Profit Ratio

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Similar questions

		(₹)
1.	Sandeep started business with Cash	1,00,000
2.	Purchased furniture for cash	5,000
3.	Purchased goods for cash	20,000
4.	Purchased goods on credit	36,000
5.	Paid for rent	700
6.	Goods costing ₹ 40,000 sold at a profit of 20% for cash

Transactions of M/s. Vipin Traders are given below.

Show the effects on Assets, Liabilities and Capital with the help of accounting Equation.

		Rs
(a)	Business started with cash	1,25,000
(b)	Purchased goods for cash	50,000
(c)	Purchase furniture from R.K. Furniture	10,000
(d)	Sold goods to Parul Traders (costing Rs 7,000 vide bill no. 5674)	9,000
(e)	Paid cartage	100
(f)	Cash Paid to R.K. furniture in full settlement	9,700
(g)	Cash sales (costing Rs 10,000)	12,000
(h)	Rent received	4,000
(i)	Cash withdrew for personal use	3,000

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