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Tuesday, April 12, 2011

Gross Profit Ratio Formula & Example

Definition: Gross Profit Ratio is the ratio of gross profit to net turnover expressed as a percentage. It is also known as "Gross profit as a percentage of net turnover" or "Gross profit percentage/margin".

Formula:
GP Ratio = (Gross profit / Net sales) * 100%

Example 1:
Kent Ltd has a total sales of $700,000, Sales returns $30,000, and Cost of goods sold $500,000. Calculate GP ratio.

Solution

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