Calculate following ratios on the basis of the following information:i Gross Profit Ratio;ii Current Ratio;iii Acid Test Ratio; andiv Inventory Turnover Ratio. 2c र 1c र Gross Profit 50,000 Revenue from Operations 1,00,000 Inventory 15,000 Tra (2024)

FAQs

How do you calculate the gross profit ratio and current ratio? ›

Gross Profit Ratio = Gross Profit Revenue from Operations × 100 Gross Profit Ratio = 50 , 000 1 , 00 , 000 × 100 = 50 % Current Ratio = Current Assets Current Liabilities Current Ratio = Inventory + Cash and Cash Equivalents + Trade Receivables Current Liabilities Current Ratio = 15 , 000 + 17 , 500 + 27 , 500 40 , 000 ...

The gross profit margin formula, Gross Profit Margin = (Revenue – Cost of Goods Sold) / Revenue x 100, shows the percentage ratio of revenue you keep for each sale after all costs are deducted.

The acid test ratio may be calculated by deducting inventory from current assets, then dividing the result by current liabilities. Divide the value of current assets by the number of current liabilities to arrive at the current ratio.

It represents the percentage of each dollar of sales that is kept as profit after deducting all expenses, including operating expenses, taxes, interest, and depreciation. The profit ratio is calculated by dividing the net profit by the total revenue of the company and expressing the result as a percentage.

Ratio Formula

The general form of representing a ratio of between two quantities say 'a' and 'b' is a: b, which is read as 'a is to b'. The fraction form that represents this ratio is a/b. To further simplify a ratio, we follow the same procedure that we use for simplifying a fraction. a:b = a/b.

Gross profit / Revenue x 100 = Gross profit margin. To calculate gross margin you need to know your gross profit, which is revenue minus cost of sales. You divide that gross profit by the revenue and multiply it by 100 to see what percentage of revenue is gross profit.

The gross profit ratio is a financial metric that helps a company assess its profitability. You can use it to determine the amount of profit a business makes by selling its goods and services after subtracting its direct costs.

The gross profit margin is calculated by subtracting direct expenses or cost of goods sold (COGS) from net sales (gross revenues minus returns, allowances and discounts). That number is divided by net revenues, then multiplied by 100% to calculate the gross profit margin ratio.

Inventory turnover is the rate that inventory stock is sold, or used, and replaced. The inventory turnover ratio is calculated by dividing the cost of goods by average inventory for the same period. A higher ratio tends to point to strong sales and a lower one to weak sales.

Calculating the current ratio is very straightforward: Simply divide the company's current assets by its current liabilities. Current assets are those that can be converted into cash within one year, while current liabilities are obligations expected to be paid within one year.

What is the formula for current ratio and quick ratio? ›

Current Ratio = Current Assets/Current Liability = 11971 ÷8035 = 1.48. Quick Ratio = (Current Assets- Inventory)/Current Liability = (11971-8338)÷8035 = 0.45. Basic Defense Interval = (Cash + Receivables + Marketable Securities) ÷ (Operating expenses +Interest + Taxes)÷365 = (2188+1072+65)÷(11215+25+1913)÷365 = 92.27.

Gross profit measures the money your goods or services earned after subtracting the total costs to produce and sell them. The formula to calculate gross profit is the total revenue minus the cost of goods sold.

Formulaically, the structure of a profitability ratio consists of a profit metric divided by revenue. The resulting figure must then be multiplied by 100 to convert the ratio into percentage form.

Examples are gross profit margin, operating profit margin, net profit margin, cash flow margin, EBIT, EBITDA, EBITDAR, NOPAT, operating expense ratio, and overhead ratio.

The net profit to gross profit ratio (NP to GP ratio) is an extension of the net profit ratio. If we deduct indirect expenses from the amount of gross profit, we arrive at net profit. In other words, gross profit is the sum of indirect expenses and net profit.

Gross profit ratio (GP ratio) is a financial ratio that measures the performance and efficiency of a business by dividing its gross profit figure by the total net sales. The gross profit ratio can also be expressed in percentage form, multiplying the result by 100.

Gross profit—also known as sales profit or gross income—is measured by subtracting the cost of goods sold (COGS) from the revenue made from sales.

The gross profit margin is calculated by subtracting direct expenses or cost of goods sold (COGS) from net sales (gross revenues minus returns, allowances and discounts). That number is divided by net revenues, then multiplied by 100% to calculate the gross profit margin ratio.