Question

If Net Revenue from Operation of a company isRs. 20 00 000 ; Gross Profit isRs. 9 00 000 and Operating Expenses areRs. 3 00 000.Its Operating ratiowill be: (a) 45% (b) 30% (c) 70% (d) 60%

Answer 1

Answer:

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%