Question
A company had the following details: • Sales =
₹50,00,000 • Cost of Goods Sold = ₹35,00,000 • Purchases = ₹20,00,000 • Operating Expenses = ₹5,00,000 • Interest Expense = ₹1,00,000 • Tax Rate = 30% What is the Net Profit after Tax?Solution
Step 1: Gross Profit = Sales – COGS = ₹50,00,000 – ₹35,00,000 = ₹15,00,000 Step 2: EBIT = Gross Profit – Operating Expenses = ₹15,00,000 – ₹5,00,000 = ₹10,00,000 Step 3: EBT = EBIT – Interest = ₹10,00,000 – ₹1,00,000 = ₹9,00,000 Step 4: Tax = 30% of ₹9,00,000 = ₹2,70,000 Step 5: Net Profit = ₹9,00,000 – ₹2,70,000 = ₹6,30,000 Note: Purchases are already included in cost of goods sold and thus will not be deducted again from sales to compute Gross profits.
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