Question

Calculate the Gross Profit Ratio from the following information : -

$\begin{array}{ccc}& \text{2016}& \text{2017}\\ & \text{Rs.}& \text{Rs.}\\ \text{Sales (Revenue from Operations)}& 1,20,000& 1,80,000\\ \text{Gross Profit}& 30,000& 36,000\end{array}$

Answer 1

Gross Profit Ratio for 2016 $=\frac{\text{Rs. 30,000}}{\text{Rs. 1,20,000}}\times 100=25\%$

Gross Profit Ratio for 2017 $=\frac{\text{Rs. 36,000}}{\text{Rs. 1,80,000}}\times 100=20\%$

Gross profit ratio has decreased in 2017 in comparison to 2016. This may be due to the reason that the prices of materials purchased may have gone up or wages and other direct charges may have increased but the sales prices may not have increased in the same proportion.