Question

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

Answer 1

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%