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A business has the following financial information - HSC - SSCE Business Studies - Question 10 - 2024 - Paper 1
Question 10
A business has the following financial information. Sales $800 000 Cost of goods sold $200 000 Gross profit $600 000 Net profit $250 000 ... show full transcript
Worked Solution & Example Answer:A business has the following financial information - HSC - SSCE Business Studies - Question 10 - 2024 - Paper 1
Step 1
Calculate Total Expenses
Answer
To find the total expenses, we need to consider both the cost of goods sold and any additional operating expenses that contribute to the net profit. Given that the net profit is 600,000, we can derive:
Total Expenses = Gross Profit - Net Profit = 250,000 = $350,000.
Step 2
Calculate Expense Ratio
Answer
The expense ratio is calculated using the formula:
[\text{Expense Ratio} = \frac{\text{Total Expenses}}{\text{Sales}}] Substituting the values we found:
[\text{Expense Ratio} = \frac{350,000}{800,000} = 0.4375] To express this as a percentage, we multiply by 100:
[\text{Expense Ratio} = 0.4375 \times 100 = 43.75%] Thus, rounding to the nearest whole number, the expense ratio is 44%.