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Total revenue of a business for the year is INR 240000 and gross profit is INR 60000. What is the gross profit ratio?

Total revenue of a business for the year is INR 240000 and gross profit is INR 60000. What is the gross profit ratio? Correct Answer 25%

The correct answer is 25%.

Key Points

  • Gross Profit Ratio
    • It is a financial ratio that measures the performance and efficiency of a business by dividing its gross profit figure by the total net sales.
    • The gross profit ratio can also be expressed in percentage form, multiplying the result by 100.
    • It is a profitability ratio that shows the relationship between gross profit and total net sales revenue.
    • Gross Profit Ratio = Gross Profit / Net Sales * 100
    • Gross Profit Ratio = 60000/240000* 100= 25%

Additional Information

  •  Gross Profit
    • It is the profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services.
    • It will appear on a company's income statement and can be calculated by subtracting the cost of goods sold( COGS) from revenue( Sales).
    • It assesses a company's efficiency at using its labour and supplies in producing goods and services.
    • It only includes variable costs and doesn't account for fixed costs.

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