T.S. Grewal Class 12 Vol 3 Chapter 4 Q.158 - Accounting Ratios

Question 158

Calculate Operating Profit Ratio in each of the following alternative cases:
Case 1: Revenue from Operations (Net Sales) ₹20,00,000; Operating Profit ₹3,00,000.
Case 2: Revenue from Operations (Net Sales) ₹6,00,000; Operating Cost ₹5,10,000.
Case 3: Revenue from Operations (Net Sales) ₹3,60,000; Gross Profit 20% on Sales; Operating Expenses ₹18,000.
Case 4: Revenue from Operations (Net Sales) ₹4,50,000; Cost of Revenue from Operations ₹3,60,000; Operating Expenses ₹22,500.
Case 5: Cost of Goods Sold (Cost of Revenue from Operations) ₹4,00,000; Gross Profit 20% on Sales; Operating Expenses ₹25,000.

Solution

Case 1
Operating Profit Ratio = Operating Profit ÷ Net Sales × 100 = 3,00,000 ÷ 20,00,000 × 100 = 15%

Case 2
Operating Profit = Net Sales − Operating Cost = 6,00,000 − 5,10,000 = ₹90,000
Operating Profit Ratio = 90,000 ÷ 6,00,000 × 100 = 15%

Case 3
Gross Profit = 20% of Net Sales = 20/100 × 3,60,000 = ₹72,000
Operating Profit = Gross Profit − Operating Expenses = 72,000 − 18,000 = ₹54,000
Operating Profit Ratio = 54,000 ÷ 3,60,000 × 100 = 15%

Case 4
Operating Profit = Net Sales − Cost of Revenue from Operations − Operating Expenses
= 4,50,000 − 3,60,000 − 22,500 = ₹67,500
Operating Profit Ratio = 67,500 ÷ 4,50,000 × 100 = 15%

Case 5
Let Net Sales = x. Since Gross Profit is 20% of Sales, Cost of Goods Sold = 80% of Sales.
4,00,000 = 0.80x
x = ₹5,00,000 (Net Sales)
Operating Profit = Net Sales − Cost of Goods Sold − Operating Expenses = 5,00,000 − 4,00,000 − 25,000 = ₹75,000
Operating Profit Ratio = 75,000 ÷ 5,00,000 × 100 = 15%