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Calculate the Gross Profit Ratio from the following information :

Particulars

Opening Inventory Rs 80,000 

Closing Inventory Rs 1,00,000 

Revenue from Operations Rs 9,00,000

Inventory Turnover Ratio 8 times

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Gross Profit Ratio = Gross Profit / Net Revenue from operations x 100

Gross Profit = Revenue from operations - Cost of Revenue from operations

Average Inventory = 80,000 + 10,00,000 / 2 = 90,000

Inventory Turnover Ratio = 8

∴ Cost of revenue from operations = 8 x 90,000

= 7, 20, 000

Gross Profit = 9,00,000 - 7,20,000

= Rs 1,80,000

Gross profit  Ratio = 1,80,00 / 9,00,000 x 100 = 20%

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