Gross Profit Ratio is the profit that a concern earns on its trading or it is the excess of the net sales over the cost of goods sold. In other words this is the ratio of gross profit to net sales and expressed as a percentage. It also helps in ascertaining whether the average percentage of work upon the goods is maintained 20% – 30% Gross Profit Ratio may be considered normal.
Gross Profit Ratio =
Gross Profit/Net Sales * 100
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