Question

From the following information, calculate operating profit ratio and operating ratio.

Particulars	Rs	Particulars	Rs
Sales Less Returns	4,00,000	Selling Expenses	25,000
Gross Profit	1,40,000	Income From Investment	1,000
Administration Expenses	35,000	Loss On Account Of Fire	2,000

Answer 1

Operating Profit = Gross Profit - Administration And Selling Expenses

= 1,40,000 - (35,000 + 25,000)

= 1,40,000 - 60,000

= Rs. 80,000

Operating Profit Ratio = (80, 000 / 4,00,000) × 100

= 20 %

Operating Ratio = (Cost Of Goods Sold + Operating Expenses) / Net Sales

= [{(Net Sales–Gross Profit) + (Administration Expenses+Selling Expenses)}/ Net Sales] X 100

= [{(4,00,000 – 1,40,000) + (35,000 + 25,000)} / 4,00,000] x 100

= 80%

The same can be alternatively be calculated as follows:

=100 – Operating Profit Ratio

= 100 – 20  

= 80%