Question

Calculate gross profit ratio and net profit ratio from the following:

\[\begin{array}{|l|r|l|r|} \hline Particulars & Amount (Rs.) & Particulars & Amount (Rs.) \\ \hline \text{Opening stock} & \text{50,000} & \text{Sales} & \text{2,75,000} \\ \hline \text{Purchase} & \text{1,50,000} & \text{Sales return} & \text{25,000} \\ \hline \text{Purchase return} & \text{20,000} & \text{Closing stock} & \text{40,000} \\ \hline \text{Wages} & \text{10,000} \\ \hline \text{Salary} & \text{25,000} \\ \hline \end{array}\]

Hint:

Gross Profit Ratio measures the efficiency of production and sales, while Net Profit Ratio reflects overall profitability after expenses.

Answer 1

Step 1: Calculation of Gross Profit \[ \text{Gross Profit} = \text{Net Sales} - \text{Cost of Goods Sold (COGS)} \] \[ \text{Net Sales} = \text{Sales} - \text{Sales Return} = 2,75,000 - 25,000 = 2,50,000 \] \[ \text{COGS} = \text{Opening Stock} + \text{Purchases} - \text{Purchase Return} + \text{Wages} - \text{Closing Stock} \] \[ \text{COGS} = 50,000 + 1,50,000 - 20,000 + 10,000 - 40,000 = 1,50,000 \] \[ \text{Gross Profit} = 2,50,000 - 1,50,000 = 1,00,000 \] Step 2: Calculation of Gross Profit Ratio \[ \text{Gross Profit Ratio} = \left(\frac{\text{Gross Profit}}{\text{Net Sales}}\right) \times 100 = \left(\frac{1,00,000}{2,50,000}\right) \times 100 = 40% \] Step 3: Calculation of Net Profit Net Profit is calculated by deducting operating expenses (Salary) from Gross Profit. \[ \text{Net Profit} = \text{Gross Profit} - \text{Salary} = 1,00,000 - 25,000 = 75,000 \] Step 4: Calculation of Net Profit Ratio \[ \text{Net Profit Ratio} = \left(\frac{\text{Net Profit}}{\text{Net Sales}}\right) \times 100 = \left(\frac{75,000}{2,50,000}\right) \times 100 = 30% \] Final Answer: - Gross Profit Ratio = \(40%\) - Net Profit Ratio = \(30%\)