Calculate : (i) Gross Profit ratio (ii) Operating ratio (iii) Net Profit ratio from the following informations :-

Sales ₹ 4,00,000, Cost of goods sold ₹ 2,40,000, Administrative expenses ₹ 50,000, Selling expenses ₹ 30,000, Loss by fire ₹ 30,000, Income from investment ₹ 10,000.

Question

Calculate : (i) Gross Profit ratio (ii) Operating ratio (iii) Net Profit ratio from the following informations :-

Sales ₹ 4,00,000, Cost of goods sold ₹ 2,40,000, Administrative expenses ₹ 50,000, Selling expenses ₹ 30,000, Loss by fire ₹ 30,000, Income from investment ₹ 10,000.

**OR**

Calculate of Return on Investment and Return on net worth (Shareholder Fund) from the following informations :-

Equity share capital (@ ₹ 100 per share) ₹ 8,00,000
8% Debenture ₹ 10,00,000
General Reserve ₹ 2,00,000
Net Profit after Tax ₹ 1,20,000
Rate of Tax = 40%

Accepted Answer

>

> [!TLDR]
> GP ratio = 40%, Operating ratio = 80%, Net profit ratio = 15% (fire loss and investment income are non-operating). OR: ROI = 14%, Return on net worth = 12%.
>
> **Main part** — Sales ₹4,00,000; COGS ₹2,40,000; Admin exp ₹50,000; Selling exp ₹30,000; Loss by fire ₹30,000 (non-operating); Investment income ₹10,000 (non-operating).
>
> | Ratio | Working | Result |
> |---|---|---|
> | (i) Gross Profit Ratio | Gross Profit = 4,00,000 − 2,40,000 = 1,60,000; 1,60,000 ÷ 4,00,000 × 100 | **40%** |
> | (ii) Operating Ratio | (COGS + Operating exp) = 2,40,000 + 50,000 + 30,000 = 3,20,000; 3,20,000 ÷ 4,00,000 × 100 | **80%** |
> | (iii) Net Profit Ratio | Net Profit = 1,60,000 − 80,000 (op. exp) − 30,000 (fire loss) + 10,000 (investment income) = 60,000; 60,000 ÷ 4,00,000 × 100 | **15%** |
>
> **OR part** — Equity share capital ₹8,00,000; 8% Debentures ₹10,00,000; General Reserve ₹2,00,000; Net profit after tax ₹1,20,000; Tax rate 40%.
>
> | Particulars | Amount |
> |---|---|
> | Net profit after tax | ₹1,20,000 |
> | Profit before tax = 1,20,000 ÷ (1 − 0.40) | ₹2,00,000 |
> | Interest on debentures = 8% of 10,00,000 | ₹80,000 |
> | Net profit before interest and tax (EBIT) = 2,00,000 + 80,000 | ₹2,80,000 | …

Component	Journal Entry (Debit/Credit)
Purchases	Debit Purchases A/c, Credit Cash/Supplier A/c
Salaries	Debit Salaries A/c, Credit Cash/Bank A/c
Depreciation	Debit Depreciation A/c, Credit Accumulated Depreciation A/c
Revenue from Operations	Debit Cash/Bank/Debtors A/c, Credit Revenue from Operations A/c

Q.Calculate :

Concept understanding — Operating Ratio Calculation

Operating Ratio — A First Look

Precise Meaning (NCERT Definition)

Why It Matters

Accounting Treatment — Which Account is Debited/Credited?

Proforma / Format (as per NCERT) …

Part (a) — Cost of Revenue from Operations

Ratio	Working	Result
(i) Gross Profit Ratio	Gross Profit = 4,00,000 − 2,40,000 = 1,60,000; 1,60,000 ÷ 4,00,000 × 100	40%
(ii) Operating Ratio	(COGS + Operating exp) = 2,40,000 + 50,000 + 30,000 = 3,20,000; 3,20,000 ÷ 4,00,000 × 100	80%
(iii) Net Profit Ratio	Net Profit = 1,60,000 − 80,000 (op. exp) − 30,000 (fire loss) + 10,000 (investment income) = 60,000; 60,000 ÷ 4,00,000 × 100	15%

Particulars	Amount
Net profit after tax	₹1,20,000
Profit before tax = 1,20,000 ÷ (1 − 0.40)	₹2,00,000
Interest on debentures = 8% of 10,00,000	₹80,000
Net profit before interest and tax (EBIT) = 2,00,000 + 80,000	₹2,80,000

Q.Calculate :

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