Explain how to calculate gross profit ratio.

Question:

Explain how to calculate gross profit ratio.

Definitions

Gross profit :This is the profit the company makes calculated as revenue less the cost of producing the product that is sold or the service that

was given to the client.

Gross profit ratio :This ratio shows the relationship between gross profit and revenue used in the gross profit calculation

Answer and Explanation:

Gross profit ratio is calculates as :Gross profit/Sales *100 (We multiply by 100 so that we can get the answer as a %)

This ratio shows what percentage of sales that became gross profit.

You can calculate the gross profit ratio on total sales or on a sale of each individual product and the result will be the same.


Learn more about this topic:

Loading...
How to Calculate Gross Profit Margin: Definition & Formula

from Financial Accounting: Help and Review

Chapter 5 / Lesson 17
12K

Related to this Question

Explore our homework questions and answers library