Profitability Ratios - Gross Profit Ratio

\[\text{Gross Profit Ratio}\quad=\frac{\text{Gross Profit}}{\text{Revenue from Operations }i.e.,\text{Net~Sales}}\times100\]

1. Gross Profit:

Gross Profit = Revenue from Operations - Cost of Revenue from Operations

2. Cost of Revenue from Operations:

Cost of Revenue From Operations = Opening Inventory + Net Purchases + Direct Expenses ( Carriage, Wages, etc.) - Closing Inventory

                                          Or

Cost of Revenue from Operations = Revenue from Operations - Gross Profit

                                         Or

Cost of Revenue From Operations = Cost of Materials Consumed (including Direct Expenses) + Changes in Inventories of Work-in-Progress and Finished Goods

                                       Or

Cost of Revenue From Operations = Cost of Materials Consumed (including Direct Expenses) + Purchases of Stock-in-Trade + Changes in Inventories of Work-in-Progress, Finished Goods and Stock-in-Trade + Direct Expenses*