NISM Certifications · NISM-Series-XV: Research Analyst · Qualities of a Good Research Report
A report on Sundaram Textiles shows net profit of Rs 60 crore on revenue of Rs 600 crore, and says: 'Net margin is 10%, which is stable versus the previous year's 10%.' Previous-year revenue was Rs 500 crore. What must the previous-year net profit have been for the statement to be correct?
The previous-year net profit must have been Rs 50 crore. A 10% net margin on previous-year revenue of Rs 500 crore gives 0.10 x 500 = Rs 50 crore, so the report's claim of a stable margin is consistent only with that profit figure.
- ARs 40 crore
- BRs 50 croreCorrect
- CRs 60 crore
- DRs 30 crore
Explanation
Net margin = net profit / revenue. For a 10% margin on Rs 500 crore of revenue, profit = 0.10 x 500 = Rs 50 crore. Rs 60 crore wrongly uses the current-year profit, and Rs 40 crore would give 8%.
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