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Question
From the following trading activities of Rovina Ltd. calculate
- Gross profit ratio
- Net profit ratio
- Operating cost ratio
- 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 |
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Solution
(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%
