Gross profit ratio of a company was 25%, its credit revenue from operations was Rs. 20,00,000 and its cash revenue from operations was 20% of the…

Finding Total Revenue from Operations:

Cash revenue from operations = 20% of total revenue

This means credit revenue from operations = 80% of total revenue

80% of Total Revenue = Rs. 20,00,000

Total Revenue from Operations = $\frac{20,00,000}{80} \times 100$8020,00,000​×100 = Rs. 25,00,000

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Calculating Gross Profit:

Gross Profit Ratio = $\frac{\text{Gross Profit}}{\text{Revenue from Operations}} \times 100$Revenue from OperationsGross Profit​×100

25% = $\frac{\text{Gross Profit}}{25,00,000} \times 100$25,00,000Gross Profit​×100

Gross Profit = $\frac{25 \times 25,00,000}{100}$10025×25,00,000​ = Rs. 6,25,000

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Calculating Net Profit:

Net Profit = Gross Profit - Indirect Expenses

Net Profit = 6,25,000 - 50,000 = Rs. 5,75,000

The relationship to understand here is that gross profit is reduced by indirect expenses (operating expenses like office expenses, selling expenses, etc.) to arrive at net profit. Direct expenses are already deducted while calculating gross profit.