Given profits for the last five years:
- 2020: Rs. 40,000
- 2021: Rs. 50,000
- 2022: Rs. 55,000
- 2023: Rs. 70,000
- 2024: Rs. 85,000
Using the formula: Average Profit = Number of YearsSum of Profits
Sum of Profits = 40,000 + 50,000 + 55,000 + 70,000 + 85,000 = Rs. 3,00,000
Average Profit = 53,00,000 = Rs. 60,000
The average profit is calculated by adding all the profits over the five-year period and dividing by the number of years to get a single representative figure that smoothens out the fluctuations in annual profits.