The ..................... indicates the percentage of each sales rupee remaining after the firm has paid for its goods.
Answer & explanation
Correct answer: option 3
Gross profit ratio as a percentage of revenue from operations is computed to have an idea about gross margin.
It is computed as follows: Gross Profit Ratio = Gross Profit/Net Revenue of Operations × 100
It indicates gross margin on products sold. It also indicates the margin available to cover operating expenses, non-operating expenses, etc. Change in gross profit ratio may be due to change in selling price or cost of revenue from operations or a combination of both. A low ratio may indicate unfavourable purchase and sales policy. Higher gross profit ratio is always a good sign.