Financial Statements

Ratios

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Financial Statements

As per the information given below, what will be the amount of Gross Profit?

Average Inventory = Rs. 80,000

Inventory Turnover Ratio = 8 times

Selling Price = 20% above revenue from operations

Rs. 80,000

Rs. 1,40,000

Rs. 1,60,000

Rs. 60,000

✅ Correct Option: 3

Cost of revenue from operations $= 8 \times 80{,}000 = 6{,}40{,}000$ .

With gross profit at $20\%$ of revenue, revenue $= \frac{6{,}40{,}000}{0.8} = 8{,}00{,}000$ .

Gross profit $= 8{,}00{,}000 - 6{,}40{,}000 = 1{,}60{,}000$ .

Note: The NTA line reading "Selling Price = 20% above revenue from operations" is self-referential; we have read it as gross profit being 20% of revenue from operations, which matches an available option.

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As per the information given below, what will be the amount of Gross Profit? Average Inventory = Rs. 80,000 Inventory Turnover Ratio = 8 times Selling Price = 20% above revenue from operations

Solution

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As per the information given below, what will be the amount of Gross Profit?

Average Inventory = Rs. 80,000

Inventory Turnover Ratio = 8 times

Selling Price = 20% above revenue from operations