Formula Of Gross Profit Ratio

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1. Gross profit ratio Gross profit ratio is a profitability ratio that shows the relationship between gross profit and total net sales revenue. The ratio is computed by dividing the gross profit figure by net sales. The basic components of the formula of gross profit ratio are gross profit and net sales. Gross profit is equal to net sales minus cost of goods sold. Net sales are equal to total gross sales less returns inwards and discount allowed. The information about gross profit and net sales is normally available from income statement of the company. The ratio can be used to test the business condition by comparing it with past years’ ratio and with the ratio of other companies in the industry. A consistent improvement in gross profit ratio over the past years is the indication of continuous improvement. When the ratio is compared with that of others in the industry, the analyst must see whether they use the same accounting systems and practices.
For the formula of gross profit ratio:
Gross profit ratio = (Gross profit)/Sales × 100%

i. SASBADI HOLDINGS BHD
In …show more content…

According to the 2015 year, gross profit margin decreases when compare with the 2014 year, which decreases 16.60% due to total revenue decrease from RM64,370,096 in 2014 year to RM63,327,676 in year 2015, which is decrease as much as RM1,042,420 and the total cost of sales also increase. Total cost of sales increase because the cost of goods sold increase which due to the printing factory have increase the price of printing service, so the company of sales will decrease cause the price of goods become expenses. Thus the price of goods increase effect to the demand of goods decrease and quantity of goods sold also decrease, so the revenue decrease and gross profit of company

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