Question

From the following trading activities of Rovina Ltd. calculate

1. Gross profit ratio
2. Net profit ratio
3. Operating cost ratio
4. Operating profit ratio

Statement of Profit and Loss
Particulars	Rs.
I Revenue from operations	4,00,000
II. Other income:
Income from investment	4,000
III. Total revenues (I+II)	4,04,000
IV. Expenses:
Purchases of stock-in-trade	2,10,000
Changes in inventories	30,000
Employee benefits expense	24,000
Other expenses (Administration and selling)	60,000
Total expenses	3,24,000
V. Profit for year	80,000

Answer 1

(1) Gross Profit Ratio = `"Gross Profit"/"Revenue from operations" xx 100`

Cost of Revenue from operations = Purchase + Change in inventories

= 2,10,000 + 30,000

= Rs. 2,40,000

Gross profit = Revenue from operations – cost of revenue from operations

= 4,00,000 – 2,40,000

= Rs. 1,60,000

Gross Profit ratio = `160000/400000 xx 100` = 40%

(2) Net Profit ratio = `"Net Profit"/"Revenue from operations" xx 100`

Net Profit ratio = `80000/400000 xx 100` = 20%

(3) Operating cost ratio = `"Operating cost"/"Revenue from operations" xx 100`

Cost of revenue from operations

= Purchase + Change in inventories

= 2,10,000 + 30,000

= Rs. 2,40,000

Operating Expenses = Administration Expenses + Selling Expenses

= Rs. 60,000

Operating cost = 2,40,000 + 60,000 = Rs. 3,00,000

Operating cost ratio = `300000/400000 xx 100` = 75%

(4) Operating profit ratio

= `"Operating profit"/"Revenue from oprations" xx 100`

Operating profit = Gross profit - Operating Expenses

= 1,60,000 - 60,000

= Rs. 1,00,000

Operating profit ratio = `100000/400000 xx 100` = 25%