Skip to content

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

Sagar Foods Ltd. reports net sales of Rs 8,00,000, cost of goods sold of Rs 5,20,000, operating expenses of Rs 1,20,000 and interest of Rs 40,000. Ignoring tax, what is the profit before tax as a percentage in its common-size income statement?

Profit before tax is Rs 1,20,000, which is 15% of net sales of Rs 8,00,000. It is found by deducting cost of goods sold, operating expenses and interest from sales, then dividing by sales, since sales is the base of a common-size income statement.

  1. A15%Correct
  2. B20%
  3. C25%
  4. D10%

Explanation

Profit before tax = 8,00,000 - 5,20,000 - 1,20,000 - 40,000 = 1,20,000. As a percentage of sales: 1,20,000/8,00,000 = 15%. The 20% option ignores interest (1,60,000/8,00,000), a missed-adjustment error.

Did you get it right without looking?

One question tells you little. A timed set on Comparative, Common-Size Financial Statements and Trend Analysis shows your real accuracy, how long you take and where you lose marks.

Practise Comparative, Common-Size Financial Statements and Trend AnalysisFree diagnostic mock

More Comparative, Common-Size Financial Statements and Trend Analysis questions