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The following information is taken from the final accounts of S.K - Leaving Cert Business - Question 11 - 2007

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The following information is taken from the final accounts of S.K. Ltd on 31/05/2007. Sales € 500,000 Gross Profit € 100,000 Net Profit € 37,500 Calculate: (i) th... show full transcript

Worked Solution & Example Answer:The following information is taken from the final accounts of S.K - Leaving Cert Business - Question 11 - 2007

Step 1

(i) the Gross Profit Margin.

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Answer

To calculate the Gross Profit Margin, use the formula:

extGrossProfitMargin=(Gross ProfitSales)×100 ext{Gross Profit Margin} = \left( \frac{\text{Gross Profit}}{\text{Sales}} \right) \times 100

Substituting the values:

extGrossProfitMargin=(100,000500,000)×100=20% ext{Gross Profit Margin} = \left( \frac{100,000}{500,000} \right) \times 100 = 20\%

Thus, the Gross Profit Margin is 20%.

Step 2

(ii) the Net Profit Margin.

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Answer

To calculate the Net Profit Margin, use the formula:

Net Profit Margin=(Net ProfitSales)×100\text{Net Profit Margin} = \left( \frac{\text{Net Profit}}{\text{Sales}} \right) \times 100

Substituting the values:

Net Profit Margin=(37,500500,000)×100=7.5%\text{Net Profit Margin} = \left( \frac{37,500}{500,000} \right) \times 100 = 7.5\%

Thus, the Net Profit Margin is 7.5%.

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