Adama Ltd: sales ₦200,000, purchases ₦140,000, stocks ₦20,000/₦10,000, expenses ₦10,000; net profit as % of sales?

To calculate the net profit percentage, we need to first find the net profit and then express it as a percentage of sales. This ratio shows how much profit the business makes for every naira of sales.

Step 1 – Calculate Cost of Goods Sold (COGS): Opening Stock (₦20,000) + Purchases (₦140,000) – Closing Stock (₦10,000) = ₦150,000.

Step 2 – Calculate Gross Profit: Sales (₦200,000) – COGS (₦150,000) = ₦50,000.

Step 3 – Calculate Net Profit: Gross Profit (₦50,000) – General Expenses (₦10,000) = ₦40,000.

Step 4 – Calculate Net Profit Percentage: (Net Profit ÷ Sales) × 100 = (₦40,000 ÷ ₦200,000) × 100 = 20%. This means for every ₦100 in sales, the business earns ₦20 in net profit after all expenses.