Knowee
Questions
Features
Study Tools

3. Calculate: 1) Gross Profit Ratio; 2) Operating Ratio; 3) Net operating Profit Ratio and 4) NetProfit Ratio and comment on profitability positionPARTICULARS RsNET SALES 1200000LESS COST OF GOODS SOLD 700000GROSS PROFIT 500000LESS OPERATING EXPENSES 200000OPERATING PROFIT 300000ADD NON OPERATING INCOME 45000345000LESS NON OPERATING EXPENSE 25000PROFIT BEFORE TAX 320000TAX RATE 40%

Question

  1. Calculate: 1) Gross Profit Ratio; 2) Operating Ratio; 3) Net operating Profit Ratio and 4) NetProfit Ratio and comment on profitability positionPARTICULARS RsNET SALES 1200000LESS COST OF GOODS SOLD 700000GROSS PROFIT 500000LESS OPERATING EXPENSES 200000OPERATING PROFIT 300000ADD NON OPERATING INCOME 45000345000LESS NON OPERATING EXPENSE 25000PROFIT BEFORE TAX 320000TAX RATE 40%
🧐 Not the exact question you are looking for?Go ask a question

Solution

Sure, let's calculate the ratios one by one:

  1. Gross Profit Ratio: This is calculated as (Gross Profit / Net Sales) * 100. So, (500000 / 1200000) * 100 = 41.67%. This means that the company makes a gross profit of 41.67% on its sales.

  2. Operating Ratio: This is calculated as (Operating Expenses / Net Sales) * 100. So, (200000 / 1200000) * 100 = 16.67%. This means that the company spends 16.67% of its sales on operating expenses.

  3. Net Operating Profit Ratio: This is calculated as (Operating Profit / Net Sales) * 100. So, (300000 / 1200000) * 100 = 25%. This means that the company makes a net operating profit of 25% on its sales.

  4. Net Profit Ratio: This is calculated as (Profit Before Tax / Net Sales) * 100. So, (320000 / 1200000) * 100 = 26.67%. This means that the company makes a net profit of 26.67% on its sales before tax.

Comment on profitability position: The company has a healthy gross profit margin of 41.67%, indicating that it is able to mark up its goods significantly. However, it spends a significant portion of its sales on operating expenses, which reduces its net operating profit margin to 25%. Despite this, the company is still able to achieve a net profit margin of 26.67% before tax, which is a good sign of profitability.

This problem has been solved

Similar Questions

Purchases Rs. 7,20,000; Office expenses Rs. 30,000; Selling expenses Rs. 90,000; Opening inventory Rs. 1,40,000; Closing inventory Rs. 80,000; Revenue from operations Rs. 12,00,000. Calculate Operating Ratio

Compute the Net profit ratio (NP ratio) of the company.Gross sales Rs. 1,00,000Opening stock Rs. 40,000Purchases Rs. 200,000Closing stock Rs. 190,000Operating and Non operating expenses Rs. 20,000

Revenue from operations Rs. 4,00,000; Cost of Revenue from Operations 60% of Revenue from Operations; Operating expenses of Rs. 30,000 and rate of income tax is 40%. What will be the amount of profit after tax

Sales Rs. 50,000; Variable cost Rs. 30,000; Net profit Rs. 6,000; fixed cost is .a.Rs. 12,000.b.Rs. 10,000.c.b. Rs. l4,000 .d.Rs. 8,000.

Net income is ______.Multiple choice question.is operating expenses minus taxesis gross profit plus operating expenses and taxesall revenue minus all expenses and taxesis net sales minus cost of goods sold

1/3

Upgrade your grade with Knowee

Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.