The gross profit ratio is the ratio of gross profit to :

The correct answer is option 4- Net Total Sales.

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.

Net Revenue of Operations = Credit sales + Cash sales - Sales return

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.