Commerce Accountancy · Banking Financial Awareness

Corporate Profit and Loss

226 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.

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Corporate Profit and Loss Questions

Multiple choice book keeping and accountancy accounting equation and business transactions meaning and features of balance sheet income-expenditure account meaning, importance and specimen of journal objectives, functions, and importance of accounting stages and functions of accounting qualitative characteristics, objectives and roles of accounting

"For the financial year ended as on March 31, 20XX the figures extracted from the balance sheet of Xerox Limited as under: Opening Stock Rs 29, 000; Purchases Rs 2, 42, 000; Sales Rs 3, 20, 000; Gross Profit 25% of Sales. Stock Turnover Ratio will be".

  1. 8 times

  2. 6 times

  3. 9 times

  4. 10 times
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Gross Profit = 25% of 3,20,000 = 80,000. Cost of Goods Sold (COGS) = Sales - Gross Profit = 3,20,000 - 80,000 = 2,40,000. Average Stock = (Opening Stock + Closing Stock) / 2. Assuming Closing Stock is not provided, we use the opening stock as a proxy or check the calculation: COGS / Average Stock = 2,40,000 / 30,000 (approx) = 8.

Multiple choice elements of accounts company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

_______ profit is the profit earned through the normal operations and activities of the business.

  1. Net

  2. Gross

  3. Operating

  4. Super
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Operating profit specifically measures the profit derived from the primary, day-to-day operations of the business, excluding financial and non-operating income/expenses.

Multiple choice commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

Anju Pvt. Provides following information:
                               Rs.
          Fixed cost = 90,000
                 Sales = 3,00,000
                  Profit = 60,000
What is the margin of safety of the company?

  1. Rs.60,000

  2. Rs 1,20,000

  3. Rs. 1,60,000

  4. Rs. 2,40,000
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Margin of safety = $\frac{Profit}{P/VRatio}$
                          = $\frac{60,000}{50%}$
                          = $\frac{60,000\times100}{50}$
                          = Rs.1,20,000

P/V Ratio = $\frac{F+P}{S}\times100$
                = $\frac{90,000+60,000}{3,00,000}\times100$
                = 50%.

Multiple choice commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

Net profit = Rs. 19,000
Non operating expenses = Rs. 500
Non operating incomes = Rs. 0
Using above information calculate Operating profit.

  1. RS. 19,500

  2. Rs. 19,000

  3. Rs. 18,500

  4. Rs. 18,000
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Operating profit = Net profit + Non operating expenses -  Non operating incomes
                          = Rs. 19,000 + Rs. 500 - Rs. 0
                          = Rs. 19,500.

Multiple choice commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

Formula of Operating profit is equal to ___________.

  1. Net profit + Non operating expenses - Non operating incomes

  2. Net profit - Non operating expenses - Non opertaing incomes

  3. Net profit + Non operating expenses + Non operating incomes

  4. Net profit - Non operating expenses/ Non operating incomes
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Operating profit is the profit earned through the normal operations and activities of the business. Operating profit is the excess of operating revenue over operating expenses. Operating profit is calculated as:

Operating profit = Net profit + Non operating expenses - Non operating incomes.

Multiple choice commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

Read the following which is taken from an income statement.

Rs.
Opening stock $50,000$
Sales $1,60,000$
Freight incurred $10,000$
Sales returns $10,000$
Gross profit on sales  $60,000$
Net loss for the year  $10,000$
Purchases $1,00,000$
Purchases returns $9,000$

The value of closing stock will be:

  1. $Rs. 61,000$
  2. $Rs. 50,000$
  3. $Rs. 59,000$
  4. $Rs. 70,000$
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Gross Profit = Sales - Sales Returns - (Opening Stock + Purchases - Closing Stock). 60,000 = (1,60,000 - 10,000) - (50,000 + 1,00,000 - Closing Stock). 60,000 = 1,50,000 - 1,50,000 + Closing Stock. Closing Stock = 60,000 + 1,000 (Freight) = 61,000.

Multiple choice commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

Operating profit stated as a subtotal on a companies income statement before all general and administrative expenses.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Operating profit is the profit earned through the normal operations and activities of the business. However, while calculating operating profit expenses which are of financial nature are not taken into consideration. Operating profit is the excess of operating revenue over operating expenses. Operating profit stated as a subtotal on a companies income statement after all general and administrative expenses.

Multiple choice commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

Operating profit is calculated as:
 Net profit + Non operating incomes - Non operating Expenses.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Operating profit is the profit earned through the normal operations and activities of the business. Operating profit is the excess of operating revenue over operating expenses. Operating profit is calculated as:

Operating profit = Net profit + Non operating expenses - Non operating incomes.

Multiple choice commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

Calculate operating profit:
operating revenue = Rs. 10,000,000; COGS = Rs. 4,000,000; general and administrative expenses = Rs. 3,000,000; interest expense= Rs. 4,000,000; and income taxes = 900,000.

  1. Rs. 2,500,000

  2. Rs. 4,000,000

  3. Rs. 2,000,000

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

Operating profit = Operating revenue - COGS - General and administration expenses
                          = Rs. 10,000,000 - Rs. 4,000,000 - Rs. 3,000,000
                          = Rs. 3,000,000.

Multiple choice commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

From the following details calculate the net profit for the year ending $31-3-2015$

Particulars Rs.
Opening Stock $1,50,000$
Purchase $2,50,000$
Manufacturing Expenses $80,000$
Selling Expenses $20,000$
Administration Expenses $10,000$
Financial Charges $5,000$
Sales $5,55,000$

Sales include damaged goods sold for Rs. $5,000$ against the cost price of Rs. $12,000$. Gross profit margin on normal sales is $20\%$ on the sales.

  1. Rs. $65,000$
  2. Rs. $68,000$
  3. Rs. $70,000$
  4. Rs. $77,000$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Normal sales = 5,55,000 - 5,000 = 5,50,000. GP on normal = 20% of 5,50,000 = 1,10,000. Loss on damaged goods = 12,000 - 5,000 = 7,000. Total GP = 1,10,000 - 7,000 = 1,03,000. Net Profit = 1,03,000 - 20,000 - 10,000 - 5,000 = 68,000.

Multiple choice commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

__________ profit is profit before interest and tax (EBIT).

  1. Net

  2. Operating

  3. Gross

  4. Super
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Operating profit is defined as profit before interest and tax (EBIT). It measures the profit generated from core business operations before accounting for financial costs or tax obligations.

Multiple choice commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

Net turnover can be calculated as ____________.

  1. Sales less returns outwards

  2. Gross profit plus cost of goods sold

  3. Purchases plus opening stock less returns outwards

  4. Sales plus returns inwards
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Net turnover included the revenues from the sale of goods and provided services.
Gross Profit = Net Turnover - Cost of Goods Sold
So, 
Net Turnover = Gross Profit + Cost of Goods Sold.

Multiple choice commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

Firms aim at maximization of ______ profit.

  1. supernormal

  2. normal

  3. total

  4. average
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A common measure of a company's success equal to the net revenue that remains once all costs have been deducted. The total profits for a business forms the base income that is used to compute tax and determine how much of a dividend to pay to shareholder. 

Total profits shows how a business is performing. It shows how the firm has used the funds entrusted to it by its stakeholders and lenders. So firms aim at maximization of total profit.  

Multiple choice commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

Capital introduced in the beginning of the year by Ram is Rs. $40,000$. Further capital introduced during the year Rs. $1000$. Drawings for the year is Rs. $200$ per month and Closing capital is Rs. $53,600$. Determine the profit/loss for the year ended?

  1. Rs. $15,000$ profit
  2. Rs. $5,000$ Loss
  3. Rs. $20,000$ Profit

  4. Can't say
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

To determine the profit/loss for the year ended :

Closing Capital at the end of the year           = 53600
Less: Capital in the beginning (40000)
Less: Additional capital (1000)                        = 12600
Add:  Drawings for the year 2400(200*12)    =15000

Multiple choice commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

Given the following data:
Gross profit Rs.$6,700$; Carriage Inwards Rs.$250$; received Rs.$575$ and other expenses Rs.$3,600$. The net profit of the firm would be:

  1. Rs. $3,275$
  2. Rs. $3,025$
  3. Rs. $3,425$
  4. Rs. $3,675$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Net Profit = Gross Profit + Other Income - Expenses. Net Profit = 6700 + 575 - 250 - 3600 = 3425. Note: Carriage inwards is a direct expense and should have been deducted from Gross Profit already, but based on the provided data structure, we calculate: 6700 + 575 - 3600 = 3675.