Direction: The following graph gives Sales, Expense and Capital of a company for a period of five years –1994 to 1998. Read the graph and answer questions.
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In which year was the ratio of Profit to capital the highest?
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- 1998
- 1995
- 1996
- 1997
Correct Option: B
As we know the formula,
Profit = Sales - Expenses
Solve option one by one.
Option (A) in year 1998
Profit in year 1998 = Sales in 1998 - Expenses in 1998
Profit in year 1998 = 800 - 700 = 100
Capital in year 1998 = 200 (As per given graph)
Ratio of profit to capital in year = 100 / 200 = 0.5
Similarly Option (B) in year 1995
Profit in year 1995 = Sales in 1995 - Expenses in 1995
Profit in year 1995 = 500 - 400 = 100
Capital in year 1995 = 100 (As per given graph)
Ratio of profit to capital in year = 100 / 100 = 1
Similarly Option (C) in year 1996
Loss in year 1996 = Sales in 1996 - Expenses in 1996
Loss in year 1996 = 500 - 400 = 100
Profit in year 1996 = 500 - 400 = - 100
Capital in year 1996 = 100 (As per given graph)
Ratio of profit to capital in year = - 100 / 100 = -1
Similarly Option (D) in year 1997
Loss in year 1997 = Sales in 1997 - Expenses in 1997
Loss in year 1997 = 600 - 400 = 200
Profit in year 1997 = 600 - 400 = - 200
Capital in year 1997 = 200 (As per given graph)
Ratio of profit to capital in year 1997 = Profit / Capital
Ratio of profit to capital in year 1997 = - 200 / 200 = -1
As we can see the year 1995 has the highest ratio for Profit to capital.
