Commerce Accountancy · Banking Financial Awareness

Corporate Profit and Loss

189 Questions

Corporate profit and loss questions evaluate financial literacy through profitability ratios and investment returns. These concepts help assess the financial health of a business entity. The topic is essential for commerce students and banking aspirants.

Profitability index ratiosReturn on equityNet earnings formulasGross profit analysisAdvertising ROI calculations

Corporate Profit and Loss Questions

Multiple choice

Super profits are

  1. actual profits

  2. normal profits

  3. excess of actual profits over normal profits

  4. none of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The excess of actual profits over normal profits is' super profits'. Those who earn excess profits, enjoy goodwill.

Multiple choice

Average profit is calculated as

  1. total of goodwill / number of years

  2. total products of profits / total of weights

  3. total of profits / number of years

  4. none of above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

It is used to calculate average profits of a number of  years. For example - the profits in the last three years are Rs 12,000 , Rs 15000, Rs18000. Average Profit = Rs 12,000 + Rs 15,000 + Rs 18,000     = Rs 15,000                                                                                                          3 

Multiple choice

The estimated revenue earnings from disinvestment in Public Sector undertakings during 2007 - 08 is

  1. Rs. 2000 crore

  2. Rs. 3000 crore

  3. Rs. 3500 crore

  4. Rs. 4000 crore
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The Union Budget for 2007-08 set a target of Rs. 4000 crore to be raised through the disinvestment of government stakes in Public Sector Undertakings (PSUs). Disinvestment is a process where the government sells its shares to private entities or the public. This revenue is typically used to fund social infrastructure and reduce fiscal deficits.

Multiple choice

As per the Railway Budget 2008-09. What was the cash profit of the Indian Railways for the year 2007-08?

  1. Approximately Rs. 10,000 crores

  2. Approximately Rs. 15,000 crores

  3. Approximately Rs. 20,000 crores

  4. Approximately Rs. 25,000 crores

  5. Approximately Rs. 30,000 crores
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

In the 2008-09 Railway Budget presented by Lalu Prasad Yadav, the cash surplus (profit) for the Indian Railways for the fiscal year 2007-08 was reported as approximately Rs. 25,000 crores.

Multiple choice

The total cost of goods available for sale with a company during the current year is Rs. 12,00,000 and the total sale during the period is Rs. 13,00,000. The gross profit margin of the company is 33 1/3% on cost.

What is the value of closing inventory during the current year?

  1. Rs. 4,00,000

  2. Rs. 3,00,000

  3. Rs. 2,25,000

  4. Rs. 2,60,000

  5. Rs. 2,55,000
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Given profit percentage = 33 1/3% on cost, i.e. 25% on sales Gross profit = 25% of 13,00,000 = Rs. 3,25,000 Value of closing inventory can be calculated as follows: Cost of goods available for sale + Gross profit = Sales + Closing stock Closing stock = Cost of goods available for sale + Gross profit - Sales = 12,00,000 + 32,50,000 - 13,00,000 Closing stock = Rs. 2,25,000

Multiple choice

Opening stock is Rs. 22,000 Closing stock is Rs. 25,000 Purchases less returns is Rs. 1,10,000 Gross profit margin (on sales) is 20%

What will be the amount of sales?

  1. Rs. 1,41,250

  2. Rs. 1,35,600

  3. Rs. 1,33,750

  4. Rs. 1,28,400

  5. None of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Cost of goods sold = Opening stock + Purchases - Closing stock = 22,000 + 1,10,000 - 25,000 = Rs. 1,07,000 Gross profit = 1/5 on Sales = 1/4 on Cost = 1/4*1,07,000 = Rs. 26,750 COGS = Rs. 1,07,000 Profit = Rs. 26,750 Thus, sales = 1,07,000 + 26,750 = Rs. 1,33,750

Multiple choice

Consider the following for Q Co. for the year 2014-15: Cost of goods available for sale is Rs. 1,00,000 Total sales are Rs. 80,000 Opening inventory of goods is Rs. 20,000 Gross profit margin is 25% on sales

Ascertain the value of the closing inventory for the year ending 2014-15.

  1. Rs. 80,000

  2. Rs. 60,000

  3. Rs. 40,000

  4. Rs. 36,000

  5. None of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Sales = Rs. 80,000 Less: Profit margin = 1/4th of 80,000 = Rs. 20,000 COGS = Rs. 60,000 COGS = Cost of goods available for sale - Closing stock 60,000 = 100,000 - Closing stock Closing stock = Rs. 40,000

Multiple choice

Consider the following data pertaining to R Ltd. for June 2015: Opening inventory is Rs. 30,000 Closing inventory is Rs. 40,000 Purchases are Rs. 5,60,000 Returns outward is Rs. 15,000 Returns inward is Rs. 20,000 Carriage inward is Rs. 5,000

If the gross profit margin is 20% of net sales, what will be the amount of gross sales for June 2015?

  1. Rs. 6,95,000

  2. Rs. 6,75,000

  3. Rs. 5,40,000

  4. Rs. 6,68,750

  5. None of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Cost of goods sold = Opening stock + Purchases + Direct expenses - Closing stock Putting the respective values in the above formula, we get COGS = 30,000 + (5,60,000 - 15,000) + 5,000 - 40,000 COGS = Rs. 5,40,000 Let the amount of net sales = x Sales = Cost of goods sold + Gross profit x = 5,40,000 + (x * 20%) Solving the above equation for x, we get x = 6,75,000 Gross sales = Net sales + Returns inward = 6,75,000 + 20,000 = Rs. 6,95,000

Multiple choice

' Bharti-Airtel', the largest mobile company of India joined the elite club of companies earning profits of more than US $1 billion. What was the net profit of the Company in the year 2006-07? About'

  1. Rs. 3500 crores

  2. Rs. 4000 crores

  3. Rs. 4250 cores

  4. Rs. 4450 crores

  5. Rs. 4500 crores
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Bharti Airtel's net profit in 2006-07 was approximately Rs. 4250 crores (note: option C has typo 'cores' instead of 'crores'). This profit milestone made Airtel the first Indian telecom company to join the elite club of companies earning over $1 billion in annual profits.

Multiple choice

If the household expenses of Rs. 25,000 of a proprietor are shown as business expenses, what is the impact on the value of profit & the total of balance sheet?

  1. Increase in profit & decrease in the total of balance sheet.

  2. Decrease in both profit and the total of balance sheet.

  3. Decrease in profit and no impact on the total of balance sheet.

  4. No impact on profit and on the total of balance sheet.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Personal expenses deductable from the capital & here no deduction so, the value of capital not affected & profit decreased. So, both amounts adjusted each other which mean no impact on the total of balance sheet.

Multiple choice

If the closing stock during a particular period is understated by Rs. 15,500 while the opening stock is overstated by Rs. 20,500, then profits are

  1. overstated by Rs. 36,000

  2. understated by Rs. 36,000

  3. overstated by Rs. 5,000

  4. understated by Rs. 5,000
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When closing stock is understated, profit is reduced by Rs. 15,500 and opening stock overstated by Rs. 20,500 further reduces the profits by Rs. 20,500. Thus, overall profit is understated by Rs. 36,000.

Multiple choice

If the closing stock during a particular period is understated by Rs. 15,500 while the opening stock is overstated by Rs. 20,500, then profits are

  1. overstated by Rs. 36,000

  2. understated by Rs. 36,000

  3. overstated by Rs. 5,000

  4. understated by Rs. 5,000
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When closing stock is understated, profit is reduced by Rs. 15,500 and opening stock overstated by Rs. 20,500 further reduces the profits by Rs. 20,500. Thus, overall profit is understated by Rs. 36,000.

Multiple choice

The net profits of a business are Rs. 1,50,000, Rs. 1,75,000 and Rs. 2,75,000 in the last 3 years. These include an investment income @ 20% p.a. of Rs. 20,000 every year, but exclude the annual insurance premium payable Rs. 10,000. Goodwill is to be valued at 1½ year purchase of average profits of 3 years. Calculate the value of goodwill.

  1. Rs. 2,85,000

  2. Rs. 3,15,000

  3. Rs. 2,55,000

  4. Rs. 3,45,000
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The average profits after deduction of interest and insurance premium are Rs. 1,70,000. Thus, goodwill = 1½ x 1,70,000 = 2,55,000