Accountancy

SOLUTION (i) G.P. Ratio and (ii) Operating Ratio.

SOLUTION It establishes the relationship between profit earned and the capital employed to earn it. This ratio is computed as under:Return on Investment = Profit before Interest, Tax and Dividends…

SOLUTION It indicates the extent of Revenue from Operations that is absorbed by the cost of Revenue from Operations and operating expenses. Lower the operating ratio, the better it is,…

SOLUTION It measures the cost of Revenue from Operations plus operating expenses in comparison to Revenue from Operations:Operating Ratio = Cost of Revenue from Operations + Operating Expenses / Net…

SOLUTION Non-operating expenses are the expenses which are not related to normal business activities such as loss on sale of fixed assets, loss from fire, interest on long-term loans etc.

SOLUTION Operating Expenses are the expenses related to normal business activities such as administration expenses, selling and distribution expenses, bad-debts, interest on short-term loans etc.

SOLUTION Operating profit is the excess of Revenue from Operations over cost of Revenue from Operations plus operating expenses. Thus, it is calculated as below:Operating Profit = Revenue from Operations…

SOLUTION It measures the margin of net profit available on Revenue from Operations. The formula for calculating this ratio is:Net Profit Ratio = Net Profit / Net Revenue from Operations…

SOLUTION This ratio measures the margin of gross profit available on Revenue from Operations. The formula for calculating this ratio is:Gross Profit Ratio = Gross Profit / Net Revenue from…