Question

calculate operating profit ratio if operating ratio is 78%(Ans is 22 %) but how?

Answer 1

Operating Ratio = 78% (Given)


=)Operating Ratio

= Operating Expenses/Total Sales Revenue = 78%

so operating Ratio Shows us the Percentage of operating expenses to the total sales revenue..

so if .. total sales revenue= 100rs

Operating Expenses/100rs = 78%

Operating Expenses = 78% × 100rs

then operating expenses= 78rs..


we know that operating profit =Total Sales Revenue - operating expenses..

= 100 -78 = 22..


operating profit ratio = operating profit/Total sales revenue

= 22/100 = 22%