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Hempstead Ltd is examining its profitability - Leaving Cert Business - Question 11 - 2021

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Question 11

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Hempstead Ltd is examining its profitability. From the information below, calculate the Gross Profit Percentage and Net Profit Percentage for 2020. Show all workings... show full transcript

Worked Solution & Example Answer:Hempstead Ltd is examining its profitability - Leaving Cert Business - Question 11 - 2021

Step 1

Gross Profit Percentage:

96%

114 rated

Answer

To calculate the Gross Profit Percentage, use the formula:

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

Substituting the given values:

Gross Profit=€42,000  Sales=€210,000\text{Gross Profit} = €42,000\ \ \text{Sales} = €210,000

Thus,

Gross Profit Percentage=(42,000210,000)×100=20%\text{Gross Profit Percentage} = \left( \frac{42,000}{210,000} \right) \times 100 = 20\%

Step 2

Net Profit Percentage:

99%

104 rated

Answer

To calculate the Net Profit Percentage, use the formula:

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

Substituting the given values:

Net Profit=€10,500  Sales=€210,000\text{Net Profit} = €10,500\ \ \text{Sales} = €210,000

Thus,

Net Profit Percentage=(10,500210,000)×100=5%\text{Net Profit Percentage} = \left( \frac{10,500}{210,000} \right) \times 100 = 5\%

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