Which of the following is not true?

Equity = Capital Employed + Debt

The correct answer is option -

1) Gross Profit = Revenue from Operations - Cost of Revenue from Operations. This is true. This formula helps in determining a company's profitability after accounting for the direct costs associated with producing its goods or services.

2) Equity = Total Assets - Total Debts. This is true. Equity is also called shareholders funds or net worth. Equity include share capital and reserves. It can be calculated by deducting total debts from the total assets.

3) Operating Profit = Revenue from Operations - Operating Cost. This is true. Operating Profit Ratio is calculated to reveal operating margin. It may be computed directly or as a residual of operating ratio.
Operating Profit Ratio = Operating Profit/ Revenue from Operations × 100
Where Operating Profit = Revenue from Operations – Operating Cost.

Operating ratio is computed to express cost of operations excluding financial charges in relation to revenue from operations. A corollary of it is ‘Operating Profit Ratio’. It helps to analyse the performance of business and throws light on the operational efficiency of the business. It is very useful for inter-firm as well as intra-firm comparisons. Lower operating ratio is a very healthy sign.

4) Equity = Capital Employed + Debt. This is not true. Equity is also called shareholders funds or net worth. Equity include share capital and reserves. Capital Employed is the total amount of capital invested in a company to generate revenue. It represents the long-term funds used by the company to finance its assets and operations. Capital Employed is calculated as the sum of Equity and Debt because it includes both the funds provided by shareholders (Equity) and the funds borrowed from external sources (Debt).