What will be the Operating Ratio if Revenue from Operations is ₹9,00,000, Gross Profit on sales is 25% and Operating Expenses are ₹90,000?
Answer & explanation
Correct answer: option 2
Operating Ratio = (Cost of Revenue from Operations + Operating Expenses)/ Net Revenue from Operations ×100
Cost of revenue from operations = Net revenue from operations - Gross profit
= 900000 - 25% of 900000
= 900000 - 225000
= ₹675000
Operating ratio =[( 675000 + 90000) / 900000} ]* 100
= (765000/900000)*100
= 85%