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CMA Intermediate · Financial Management and Business Data Analytics · Comparative, Common-Size Financial Statements and Trend Analysis

In the common-size income statement of Kaveri Foods Ltd., total sales of ₹50,00,000 are taken as 100%. Cost of goods sold is ₹32,50,000 and operating expenses are ₹9,00,000. What percentage of sales is the operating profit?

Operating profit is 17% of sales. Sales of ₹50,00,000 less COGS of ₹32,50,000 and operating expenses of ₹9,00,000 leave ₹8,50,000, which divided by ₹50,00,000 and multiplied by 100 gives 17%.

  1. A65%
  2. B18%
  3. C17%Correct
  4. D83%

Explanation

Operating profit = 50,00,000 − 32,50,000 − 9,00,000 = 8,50,000. As a percentage of sales: 8,50,000/50,00,000 × 100 = 17%. Option B (18%) ignores the cost of goods sold and uses only operating expenses (100 − 18 = 82 is not it), so it is a miscalculation. Option A is the COGS percentage.

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