Question

From the following information calculate Operating Profit ratio: Opening Stock Rs 10,000; Purchases Rs 1,20,000; Revenue from operations Rs 4,00,000; Purchase Returns Rs 5,000; Returns from Revenue from operations Rs 15,000; Selling Expenses Rs 70,000; Administrative Expenses Rs 40,000; Closing Stock Rs 60,000.

Answer 1

`"Operating Profit Ratio"="Operating Profit"/"Revenue from Operations"xx100`

Operating Profit = Gross Profit - Other Operating Expenses + Other Operating Incomes and Gross Profit = Revenue from Operatings - Returns from Revenue from Operations - (Opening Stock + Purchase - Purchase Return - Closing Stock)

= 4,00,000 - 15,000 - (10000 + 1,20,000 - 5000- 60000)

= 3,20,000

`"Revenue from Operations"="Gross Profit - Administrative Expenses - Selling Expenses"/"Revenue from Operations" xx100`

`=(3,20,000 - 40,000- 70,000)/(4,00,000)xx100`

`=(2,10,000)/(4,00,000)xx100=52.5%`