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Gross profit ratio interpretation


gross profit ratio interpretation

To illustrate, let's say Company ABC makes shoes. .
There may be omission of sales.The selling price of the goods has graciliano ramos vidas secas pdf gone up without corresponding increase in the cost of goods sold.Solution: (45,000* / 200,000.225.5 *Net profit after tax: 50,000 (50,000 .1) 45,000 * Net sales: 210,000 10,000 200,000, significance and Interpretation: Net profit (NP) ratio is a useful tool to measure the overall profitability of the business.It is the most commonly calculated ratio.It is employed for inter-firm and inter-firm comparison of trading results.A high ratio indicates the efficient management of the affairs of business.
Net profit ratio (NP ratio) is a popular profitability ratio that shows relationship between net profit after tax and net sales.It is computed by dividing the net profit (after tax) by net sales.Gross profit is what is revealed by the trading account.Particulars particulars, sales 1,55,000, purchases 80,000, sales returns 5,000, purchases returns 10,000, opening stock 40,000, closing stock 10,000.Definition and Explanation: Gross profit ratio is the ratio of gross profit to net sales.e.Formula: For the purpose of this ratio, net profit is equal to gross profit minus operating expenses and income tax. .The relationship between net profit and net sales may also be expressed in percentage form.The gross profit margin percentage tells us that Company ABC has 60 of its revenues left over after it pays the direct costs associated with making its shoes (its cost of goods sold (cogs) ).The valuation of the opening stock is lower than what it should be or the valuation of the closing stock is higher than what it should.The top number in the equation, known as gross profit or gross margin, is the total revenue minus the direct costs of producing that good or service.




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