Calculate the Operating Ratio from the following information:
Particulars Amount (₹) Revenue from Operations (Cash + Credit) 25,00,000 Purchases (Cash + Credit) 12,00,000 Carriage Inward 20,000 Salaries 1,45,000 Wages 85,000 Increase in Inventory 50,000
Calculate the Operating Ratio from the following information:
| Particulars | Amount (₹) |
|---|---|
| Revenue from Operations (Cash + Credit) | 25,00,000 |
| Purchases (Cash + Credit) | 12,00,000 |
| Carriage Inward | 20,000 |
| Salaries | 1,45,000 |
| Wages | 85,000 |
| Increase in Inventory | 50,000 |
Solution and Explanation
Operating Ratio is calculated using the formula:
Operating Ratio = (Operating Cost / Revenue from Operations) × 100
Step 1: Calculate Cost of Goods Sold (COGS)
COGS = Purchases + Carriage Inward - Increase in Inventory
= 12,00,000 + 20,000 - 50,000 = 11,70,000
Step 2: Operating Expenses
Operating Expenses = Salaries + Wages
= 1,45,000 + 85,000 = 2,30,000
Step 3: Operating Cost
Operating Cost = COGS + Operating Expenses
= 11,70,000 + 2,30,000 = 14,00,000
Step 4: Calculate Operating Ratio
Operating Ratio = (14,00,000 / 25,00,000) × 100 = 56%
Answer: Operating Ratio = 56%
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