FORMU! (A) PROFITABILITY ‘RATIOS. BASED 0] <> 7 Gross Profit L Gross Profit Ratio = “7? Sales x 100 .. _ Net Profit 2. Net Profit Ratio = 7¢ Sates * 100 . «. _ Cost of Goods Sold + Operating Expenses Oo: ig = O08 penses SH / peratiny Ratio Ne San x 100 OR Operating Ratio = 100 fit Ratio) : «9 _ Net Operating Profit 4, Net Operating Profit Ratio Net Sales x 100 5. Expenses Ratio : ; ._, - Raw Material Consumed @) 5 (a Raw Material Consumed Ratio Not Sal x 100 ®) ; jo — Lost of Direct Wages Cost of Direct Wages Ratio Net Sales x* 100 © : . . - Manufacturing Expenses Manufacturing Expenses Ratio NeESeies x 100 @ oF jo _ Fixed Revenue Expenses xed Revenue Expenses Ratio Nerezieg » 100 Where, Fixed Revenue Expenses = Factory Rent © Variable Revenue Expenses Ratio = Vatiable Revenue Expenses 199 Net Sales Administrative Revenue Expenses Net Sales 100 {) Administrative Revenue Expenses Ratio = ‘Scanned ith CamSesner208 wadtiist ufetein ase Administrative Reven ue Expenses > () Administrative Revenue Expenses Ratio = Reteaies ‘ ___ Selling and Distribution E: @ Selling and Distribution Expenses Ratio = Slim. Net Seles eS x 100 6. Cash Profit Ratio = Cash Profit ,. 199 Net Sales ‘Scanned ith CamSesnerBea aU A Mraheart sere (EXAMPLES RELATED TO PROFITABILITY RATIO) sample 1. eee we Ser fa. A geet 8 A Sie fea Ta BF The following figures were extracted from the books of Magadh Corp. Ltd. : 2011 2012 Units Sold (No.) 5,000 6,000 Cost of Sales @ 9,50,000 11,85,600 Sales @) 12,50,000 15,60,000 Fas OM aaa a Hise Gi see mF EU ead aT fae FifaT Find out Gross Profit Ratio and analysis the variations in Gross Profit : Solution : Gross Profit Ratio = St8s Profit ,. 199 Sales Gross Profit Ratio (2011) = {1:59.00 — 9,50,000) ,. 199 12,50,0 3,74,400 15,60,000 Gross Profit Ratio (2012) = x 100 = 24% ‘Scanned ith CamSesner138 Analysis: Gross Profit for the year 2011 is 3,00,000 and for the year Ratio for both the years is 24%. Net increase in Gross Profit increase in sales volume % Example 2. 31 FAR, 2012 Ht TAA ey j ew Following is the Profit & Loss Statement of Sri Ram Traders for the Ueatitst uetigrt ase 2012 © 8,74,400. Gross Bog, is 774,400. This is accoun: of sales = 2,35,600. 3,10,000 and by increase in cost aa af} faut am ded ee eT year ended Statement of Profit and Loss of Sir Ram Traders (for the year ended 31st Dec. 2012) Notes No.| Amount = Particulars Revenue from Operation Sales Less : Returns | Revenue from Operations (Net Sales) | Add : Other Income cant Non-operating Income ee Total Revenue | Less : Expenses : Cost of Goods Sold : z Opening Stock 75,000 | Add : Purchases 250,000 | Carriage 5,000 Wages 5,000 | Factory Rent 10,000 | 3,45,000 Less : Closing Stock. —_— 90,000 | —Administration Expenses Salina © Distibtoy Expense} <=" 3p = i er Non: xponses Net Pane year am Frafefaa argurit # fear (You are required to show the following Rati “1. FR AM 3A (Gross Profit Ratio) —~ 2. HAI TMT (Operating Ratio) — 3. 214 ama (Expenses Ratio) — A. U& Aare GM 3g Operating Net Profit}Ratio)~ 5. YS AI ATA (Net Profit Ratio, 30 SO Jolution : Gross Profit Net Sales 2, = 245,000 = 5,00,000 * 100 = 49% am _ Operating Ratio = C28t of Goods Sold + Operating Exp, Feeomn , passe G 2,55,000 + 1,20,00 5,00,000 * 100 = SIRO 100 CB) 1. Gross Profit Ratio = x 100 oO Sa, he x1 2. So | oQO-2S = YX ‘Scanned ith CamSeener ~ 8,00,000Wher? ¢ Goods sold = (Selling Price ~ Gross Profit) 1, Cos! = (5,00,000 - 2,45,000) = % 2,55,000 srrat (Or) cost of Goods sold = (Opening Stork + Purchases +' Carriage + Wages + Factory Rent — Closing.Stock) = (75,000 + 2,50,000 + 6,000 + 5,000 + 10,000 ~ 90,000) = © 2,55,000 2, operating Expenses = (Administration Exp. + Selling Exp. + Financial Exp.) + Onera = (80,000 + 30,000 + 10,000) = % 1,20,000 | ‘gxpenses Ratios : . @) Administration Expenses Ratio Administration Exp. 49 ~ Net Sales | 780,000 199 hem) ~~ . = 00,009 * 200 Gi) Selling and Distribution Exp. Ratio ne _ 8. &D. Expenses Net Sales 100 : Z = 5,00,000 * 10° Finance Expenses. 199 Net Sales ? 10,000 x 100 5,060,000, (i) Finance Exp. Ratio (iv) Other Non-operating Exp. Ratio Net Sales 5,000 199 2 = 500,000 7 ou © Operating-Net Profit Ratio = Operating Net Profit , 199 Net Sales T,25,000 = 25% = $0000 * 100= 25% . _. _ Net Profit, D- __ Net Profit Ratio = ‘Net Sales * 100 - = 1,25,00077 fe = §,00,000 * 100 26 [oo-ra¢ " “ixed Revenue Expenses and Sales Ratio Cactory Rent) > Fixed Revenue EXP: 100 90), | — TS Other Non operating Exp. ,. 199 Net Sales - = 10,000, 504,009 * 20° 6%) lance Expenses has been treated aS Operating expense ‘Scanned ith CamSesner