Based on following data related to Ambe limited, Jaipur, Answer question.
|
|
₹ |
|
Revenue from operations |
8,40,000 |
|
Cost of revenue from operations |
4,20,000 |
|
Selling Expenses |
80,000 |
|
Administrative Expenses |
40,000 |
|
Equity share capital |
1,00,000 |
|
8% preference share capital |
50,000 |
|
10% debentures |
1,00,000 |
|
Profit after Tax |
1,74,000 |
|
Tax Rate |
40% |
Identity the ratio that is computed to analyse cost of operation in relation to revenue from operations.
Answer & explanation
Correct answer: option 1
The correct answer is Option 1 - Operating Ratio.
Operating ratio is computed to analyse cost of operation in relation to revenue from operations. It is calculated as follows: Operating Ratio = (Cost of Revenue from Operations + Operating Expenses)/ Net Revenue from Operations ×100.
Operating expenses include office expenses, administrative expenses, selling expenses, distribution expenses, depreciation and employee benefit expenses etc.
Cost of operation is determined by excluding non-operating incomes and expenses such as loss on sale of assets, interest paid, dividend received, loss by fire, speculation gain and so on.