# ISC 12 Profitability Ratio Questions for Practice

## Types of Profitability Ratio

1. Gross Profit Ratio
2. Net Profit Ratio
3. Operating Ratio
4. Operating Profit Ratio
5. Earning per share
6. Price Earning Ratio
7. Return on Investment

ISC 12 Profitability Ratio Questions for Practice

1.Gross profit ratio:

Gross profit ratio establishes the relationship between gross profit and revenue from operations (net sales). This ratio is expressed in percentages. Gross profit ratio shows the margin of profit. A high gross profit ratio is a great satisfaction to the management.

ISC 12 Profitability Ratio Questions for Practice

2.Net Profit Ratio-

Net profit ratio establishes the relationship between Net profit and  revenue from operations (net sales).This ratio  is expressed in percentage. The main objective of calculating this ratio is to determine the overall profitability. Higher the net profit Ratio, better it is for the business.

3. Operating Ratio-

Operating ratio establishes the relationship between (Cost of Revenue from Operations+ Operating Expenses) operating cost and revenue from operations (net sales).

This ratio is expressed in percentages. The main objective of calculating this ratio is to the measurement of the efficiency and profitability of the business enterprise. lower the Operating ratio, better it is for the business because it will leave higher margin of profit on revenue from operations.

4. Operating Profit Ratio-

Operating Profit Ratio establishes the relationship between Operating Profit and  revenue from operations (net sales).

This ratio  is expressed in percentage. It helps in examining the overall efficiency of the business. It measures profitability and soundness of the business. Higher the ratio, the better is the profitability of the business.

Non-Operating Expenses = Interest on Debentures / Long Term Loans + Loss on sale of Non-Current Assets.

Non-Operating Incomes = Interest and Dividend Received on Investment + Profit on sale of Non-Current Assets.

Operating Expenses = Employee Benefit Expenses + Depreciation and Amortisation Expenses + Selling and Distribution Expenses+ Office and Administrative Expenses.

NOTE: Operating Ratio and Operating Profit Ratio are inter-related.

Total of Operating Ratio and Operating Profit Ratio will be 100.

If Operating Ratio  75 %. It means that the operating profit Ratio is 25%.

If Operating Profit Ratio  20 %. It means that the operating Ratio is 80%.

ISC 12 Profitability Ratio Questions for Practice

5. Earning per share-

6. Price Earning Ratio-

7. Return on Investment-

Capital employed = Shareholders’ Funds + Non-current Liabilities – Non-trade Investments
OR
Capital employed =Non-current Assets (excluding Non-trade Investments) + Working Capital
OR
Capital employed =Property, Plant & Equipment & Intangible Assets + Trade Investments + Working Capital
Note:  Investments to be taken as non-trade investments unless specified as trade investments.
Note: In Return on Investments Ratio- Net Profit before interest and tax will not include interest on non-trade
investments.

ISC 12 Profitability Ratio Questions for Practice

Question No.1

ISC SPECIMEN QUESTION PAPER 2023

ISC 12 Profitability Ratio Questions for Practice

Question No.2

ISC SPECIMEN QUESTION PAPER 2018

Question No.3

ISC 12 Profitability Ratio Questions for Practice

Question No.4

Calculate the (a) Operating ratio (b) Operating Profit Ratio from the following data :
Revenue from Operations ₹ 4,25,000
sales return ₹ 25,000,
Opening Inventory ₹ 50,000
Closing Inventory ₹ 30,000
Purchase ₹ 3,05,000
Purchase return ₹ 5,000
Direct Expenses ₹ 15,000
Operating Expenses ₹ 35,000
N0n-Operating Expenses ₹ 15,000.
N0n-Operating Income ₹ 10,000.

Question No.5

Calculate Net Profit Ratio from the following data :
Revenue from Operations ₹ 8,00,000
Gross profit Ratio 25%
Operating Ratio 90%
N0n-Operating Expenses ₹ 4,000.
N0n-Operating Income ₹ 44,000.

Important questions of fundamentals of partnership

Question No.6

The following figures have been obtained from the statement of Profit and Loss of Rachit Ltd. for the year 31st March, 2022.
Opening Inventory 1,20,000
Revenue from operations 8,00,000
Purchases 5,50,000
Closing Inventory 80,000
Wages 10,000
Interest on investment 10,000
Non-operating expenses 30,000
Profit on sale of investment ₹20,000
You are required to calculate
(a) Gross profit ratio
(b) Net profit ratio
(c) Operating profit ratio.

ISC 12 Profitability Ratio Questions for Practice

Question No.7

Net profit after Interest but before tax ₹ 1,40,000
15% Long term debt: ₹ 4,00,000
Shareholders fund: ₹ 2,40,000
Tax rate: 50%, Calculate Return on capital employed.

Important questions of fundamentals of partnership-2

Important questions of fundamentals of partnership-5

ACCOUNTING TREATMENT OF GOODWILL AT THE TIME OF ADMISSION OF A NEW PARTNER