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✦ FREE LEARNING — CLASS 11 & 12 — CBSE · PSEB — ACCOUNTS · ECONOMICS · BST ✦
Operating Profit Ratio of Star Ltd. is 20%. State, giving reason, which of the following transactions will (a) increase, (b) decrease, or (c) not alter the Operating Profit Ratio (assuming Operating Cost is variable, i.e., varies with Revenue from Operations):
(a) Purchase of Stock-in-Trade ₹1,00,000.
(b) Purchases Return ₹20,000.
(c) Revenue from Operations on sale of Stock-in-Trade ₹1,25,000.
(d) Stock-in-Trade costing ₹25,000 withdrawn for personal use.
| Transaction | Effect | Reason |
|---|---|---|
| (a) | No Change | Both Purchases and Closing Inventory increase by the same amount, so Cost of Revenue from Operations remains unchanged. |
| (b) | No Change | Both Purchases and Closing Inventory decrease by the same amount, so Cost of Revenue from Operations remains unchanged. |
| (c) | No Change | Revenue from Operations increases but Closing Inventory decreases by the same percentage (not the same amount) — so Cost of Revenue from Operations increases in the same proportion as Revenue. |
| (d) | No Change | Both Purchases and Closing Inventory decrease by the same amount, so Cost of Revenue from Operations remains unchanged. |
Accounting & Commerce Educator
Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.
This guide covers "T.S. Grewal Class 12 Vol 3 Chapter 4 Q.159 - Accounting Ratios", focusing on key definitions, step-by-step concepts, applications, and revision guidelines relevant to Chapter 4 - Accounting Ratios.
It is primarily curated for Class 11 and Class 12 high school commerce, accounting, and economics students, as well as aspirants preparing for board exams or CA Foundation.
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