Question

Other income is Rs 5,00,000 which is 25% of the Revenue from operation. Employees benefit Expenses are 30% of the Revenue from operation. Tax rate is 40%. Net profit after tax will be :

• A. Rs 10,25,000
• B. Rs 11,40,000
• C. Rs 10,75,000
• D. Rs 10,35,000

Hint:

Always calculate profit before tax before deducting any kind of taxes.

Answer 1

The Correct Option is A

Calculating Net Profit After Tax (NPAT):
This requires working backwards from given relationships between other income, revenue from operations, and employee benefit expenses, and then applying the tax rate.
Step 1: Calculate Revenue from Operations: If Other Income (Rs5,00,000) is 25% of Revenue from Operations, then
Revenue from Operations = Rs5,00,000 / 0.25 = Rs20,00,000

Step 2: Calculate Employee Benefit Expenses: Employee Benefit Expenses = 30% of Revenue from Operations
Employee Benefit Expenses = 0.30 * Rs20,00,000 = Rs6,00,000

Step 3: Calculate Profit Before Tax (PBT) PBT = Revenue from Operations + Other Income - Employee Benefit Expenses
PBT = Rs20,00,000 + Rs5,00,000 - Rs6,00,000 = Rs19,00,000
Step 4: Calculate Tax Expense Tax Rate = 40% Tax Expense = 40% of PBT Tax Expense = 0.40 * Rs19,00,000 = Rs7,60,000
Step 5: Calculate Net Profit After Tax (NPAT) NPAT = PBT - Tax Expense
NPAT = Rs19,00,000 - Rs7,60,000 = Rs11,40,000
Therefore, The net profit after tax will be Rs 11,40,000