Question:
The formula for calculating Gross ratio is?
The formula for calculating Gross ratio is?
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Keep in mind: Gross Ratio involves "Total Expenses", whereas Operating Ratio uses "Operating Expenses" as the numerator.
Updated On: Jul 10, 2026
- Total expenses/Gross income
- Fixed expenses/Gross income
- Operating expenses/Gross income
- Gross income/Total asset x 100
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The Correct Option is A
Solution and Explanation
Step 1: Understanding the Concept:
Farm management analysis uses ratios to evaluate the financial feasibility, leverage, and efficiency of a farming business.
Key Formula or Approach:
The Gross Ratio determines the percentage of gross income that goes toward meeting total expenses:
\[ \text{Gross Ratio} = \frac{\text{Total Expenses}}{\text{Gross Income}} \]
Step 2: Detailed Explanation:
A lower Gross Ratio is desirable as it indicates that a smaller proportion of the gross revenue is used to cover expenses, resulting in higher net profitability.
Step 3: Final Answer:
The correct formula is Total expenses/Gross income.
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