Question

Given the following information:

	₹
Revenue from Operations	3,40,000
Cost of Revenue from Operations	1,20,000
Selling Expenses	80,000
Administrative Expenses	40,000

Calculate Gross Profit Ratio and Operating Ratio.

Answer 1

Operating Expenses = Selling Expenses + Administrative Expenses

= ₹ 80,000 + ₹ 40,000

= ₹ 1,20,000

Operating Ratio = `"Cost of Revenue from Operations + Operating Expenses"/"Net Revenue from Operations" xx 100`

= `(₹ 1,20,000 + ₹ 1,20,000)/(₹ 3,40,000) xx 100`

= `(₹ 2,40,000)/(₹ 3,40,000) xx 100`

= 70.59%

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

= ₹ 3,40,000 − ₹ 1,20,000

= ₹ 2,20,000

Gross Profit Ratio = `"Gross Profit"/"Revenue from Operations" xx 100`

= `(₹ 2,20,000)/(₹ 3,40,000) xx 100`

= 64.71%