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Question
Given the following information:
Sales 3,40,000
Cost of Goods Sold 1,20,000
Selling expenses 80,000
Administrative Expenses 40,000
Calculate Operating Ratio from the above:
Sales 3,40,000
Cost of Goods Sold 1,20,000
Selling expenses 80,000
Administrative Expenses 40,000
Calculate Operating Ratio from the above:
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Solution
The correct option is A 70.58
The operating ratio of a company can be determined by comparing the operating expenses with the net sales. Smaller the ratio, higher is the efficiency of the business.It is calculated as:Operating Ratio = (Operating expenses/ Net Sales) x 100 = (Cost of Goods sold + Selling expenses + Administration expenses/ Net Sales) x 100 = (1,20,000+80,000+40,000/3,40,000)x100 = (2,40,000/3,40,000)x100 = 70.58%
The operating ratio of a company can be determined by comparing the operating expenses with the net sales. Smaller the ratio, higher is the efficiency of the business.
It is calculated as:
Operating Ratio = (Operating expenses/ Net Sales) x 100
= (Cost of Goods sold + Selling expenses + Administration
expenses/ Net Sales) x 100
= (1,20,000+80,000+40,000/3,40,000)x100
= (2,40,000/3,40,000)x100 = 70.58%
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