Sagar Ltd. was suggested to analyze their performance to take corrective action at the right time to arrest the fall in profits and also for maintaining operational efficiency.
Following information is given-

Operating Cost = ₹8,50,000
Gross Profit Ratio = 20%
Operating Expenses = ₹50,000

What will be the operating ratio of the company?

85%

Operating Ratio = (Cost of Revenue from Operations + Operating Expenses)/ Net Revenue from Operations ×100
                            = (800000 + 50000)/ 1000000 x 100
                           = (850000/1000000) x 100
                           =85%

Revenue from operations= Gross profit -  cost of revenue from operations
Let us assume revenue from operations is x so gross profit is (20x/100)
                                      ={ x - (20x/100)} = 800000
                                      = 80x = 80000000
                                       = x= ₹1000000
                                      
Cost of Revenue from opeartions= Operating cost - Operating expenses
                                               = 850000 - 50000
                                                = ₹800000