Page 279 - MA-12

Ratio Analysis 4.7
Gross Profit = Revenue from Operations – Cost of Revenue from Operations/
Cost of Goods Sold (WN 1)
= ` 5,00,000 – ` 3,00,000 = ` 2,00,000.
Cost of Goods Sold (WN 1) +
Operating Expenses (WN 2)
(ii) Operating Ratio = ×100
Revenue from Operations
`
` 3,00,000 + 1,22,000
= ×100 = 84.4%.
` 5,00,000
Operating Profit (WN 3) ` 78,000
(iii) Operating Profit Ratio = ×100 = ×100 = 15.6%.
Revenue from Operations ` 5,00,000
Working Notes:
1. Calculation of Cost of Goods Sold:
`
Purchases of Stock-in-Trade 3,00,000
Changes in Inventories of Stock-in-Trade (20,000)
Direct Expenses [` 6,000 (Carriage Inwards) + ` 14,000 (Wages)] 20,000
Cost of Goods Sold 3,00,000

2. Calculation of Operating Expenses:
Administrative Expenses 1,02,000
Selling and Distribution Expenses 20,000
Operating Expenses 1,22,000
3. Operating Profit = Net Profit + Interest (Finance Cost) – Dividend Received
= ` 80,000 + ` 3,000 – ` 5,000 = ` 78,000.
4. Finance Cost is considered to be an expense not related to Operating Expenses.
Illustration 2.

From the following Balance Sheet of Defence Brokers Ltd., calculate Debt to Equity Ratio:
BALANCE SHEET as at 31st March, 2019
Particulars Note No. `

I. EQUITY AND LIABILITIES
1. Shareholders’ Funds
(a) Share Capital 15,00,000
(b) Reserves and Surplus (2,30,000)
2. Non-Current Liabilities
(a) Long-term Borrowings 15,00,000
(b) Long-term Provisions 2,85,000
3. Current Liabilities
(a) Short-term Borrowings 55,000
(b) Trade Payables 1,15,000
(c) Other Current Liabilities 25,000
Total 32,50,000