Question:
Statement I: Snow Ltd. made a net profit of ₹ 5,00,000 after taking into consideration interest on investment of ₹ 1,00,000. Operating profit before working capital changes would be ₹ 4,00,000.
Statement II: To calculate operating profit, before working capital changes, interest on investment is subtracted from net profit because it is a non-operating income.
Choose the correct option:
Statement I: Snow Ltd. made a net profit of ₹ 5,00,000 after taking into consideration interest on investment of ₹ 1,00,000. Operating profit before working capital changes would be ₹ 4,00,000.
Statement II: To calculate operating profit, before working capital changes, interest on investment is subtracted from net profit because it is a non-operating income.
Choose the correct option:
Statement II: To calculate operating profit, before working capital changes, interest on investment is subtracted from net profit because it is a non-operating income.
Choose the correct option:
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Subtract non-operating incomes like interest/dividend from Net Profit to calculate Operating Profit.
Updated On: Jul 7, 2025
- Only Statement I is true
- Only Statement II is true
- Both the Statements are false
- Both the Statements are true
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The Correct Option is D
Solution and Explanation
Operating profit excludes non-operating incomes such as interest on investments.
So, Net Profit ₹ 5,00,000 − Interest ₹ 1,00,000 = ₹ 4,00,000 Operating Profit.
Hence, both statements are correct.
So, Net Profit ₹ 5,00,000 − Interest ₹ 1,00,000 = ₹ 4,00,000 Operating Profit.
Hence, both statements are correct.
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