2. This ratio discloses the relationship prevailing
between the gross profit and net sales and
expressed in percentage. The following formulae
are used to calculate Gross Profit Ratio
3. Gross Profit Ratio =
(Gross Profit /Net Sales x100)
OR
Gross Profit Ratio =
(Sales — Cost of Goods Sold) / Net Sales x 100
4. Net Profit Ratio
This ratio indicates the efficiency of
management on Manufacturing,
Administrative, Selling and other
business activities.
5. Net Profit Ratio =
Net Profit after Tax / Net Sales x 100
OR
Net Profit Ratio =
Net Profit / Net Sales x 100
6. Operating Ratio
This ratio discloses the relationship
prevailing between the operating cost
and sales in percentage. It indicates
the cost of operations per rupee of
sales.
7. Operating Ratio =
Operating Cost / Net Sales x 100
Operating Cost =
Cost of goods sold + Operating Expenses
Operating Expenses =
Office and Administrative Expenses +
Selling and Distribution Expenses
8. Operating Profit ratio=
100- Operating ratio
OR
Operating Ratio=
Operating Profit/Net Sales x 100
Operating Profit =
Net Sales – Operating Cost
9. From the following information calculate
1.Gross Profit ratio
2. Operating ratio
3.Operating Profit ratio
4.Net profit ratio
11. Selling and Distribution Expenses Rs 120000
Income Tax Rs 80,000
Profit on Sale of Furniture Rs 60,000
Loss on Sale of Machinery Rs 40,000
Rent paid Rs 60,000
