Given:
- Revenue from operations = ₹3,40,000
- Cost of revenue from operations = ₹1,20,000
Calculation of Gross Profit:
Gross Profit = Revenue from operations - Cost of revenue from operations
Gross Profit = 3,40,000 - 1,20,000 = ₹2,20,000
Calculation of Gross Profit Ratio:
The formula is: Gross Profit Ratio = Revenue from operationsGross Profit × 100
Gross Profit Ratio = 3,40,0002,20,000 × 100
Gross Profit Ratio = 0.6471 × 100 = 64.71%
The gross profit ratio of 64.71% indicates that for every ₹100 of revenue, the business earns a gross profit of ₹64.71 after covering the cost of revenue from operations.