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Question
Calculate the Operating Ratio of Zen Ltd. (up-to two decimal places) from the following information:
| Particulars | (₹) |
| Revenue from Operations | ₹ 9,00,000 |
| Gross Profit | 20% of cost |
| Operating Expenses | ₹ 60,000 |
Solution
Given: Revenue from Operations = ₹ 9,00,000
Operating Expenses = ₹ 60,000
Gross Profit = 20% of cost
Revenue from Operations = Gross Profit + Cost of Goods Sold
9,00,000 = (0.20 × COGS) + COGS
9,00,000 = 1.20 × COGS
COGS = `(9,00,000)/1.20`
COGS = 7,50,000
Operating Ratio = `" Operating Expenses + Cost of Goods Sold "/"Revenue from Operations"xx 100`
= `(60,000 + 7,50,000)/(9,00,000) xx 100`
= `(8,10,000)/(9,00,000)xx 100`
= 90%
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