Selim is a solicitor whose practice generated £385 750 of fees in the 20X6 financial year.His total expenses for the same period were £275 580.Selim expects his fee income to rise by 13% in the current 20X7 financial year.Expenses, however, are forecast to rise by only 11.7%.What is Selim's forecast net profit margin for the 20X7 financial year (to one decimal place)?

Question

Quizplus · Accepted Answer

First, we need to calculate the net profit for the 20X6 financial year:

Net Profit = Total fees - Total expenses
Net Profit = £385,750 - £275,580
Net Profit = £110,170

Next, we can use the expected increase in fees and expenses to forecast the net profit for the 20X7 financial year:

Expected Fees = £385,750 * 1.13 = £435,637.50
Expected Expenses = £275,580 * 1.117 = £307,990.26

Expected Net Profit = Expected Fees - Expected Expenses
Expected Net Profit = £435,637.50 - £307,990.26
Expected Net Profit = £127,647.24

Finally, we can calculate the net profit margin as a percentage of the expected fees:

Net Profit Margin = (Expected Net Profit / Expected Fees) * 100
Net Profit Margin = (£127,647.24 / £435,637.50) * 100
Net Profit Margin = 29.4% (rounded to one decimal place)

Therefore, the answer is (C) 29.4%.

Selim Is a Solicitor Whose Practice Generated £385 750 of Fees