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Finding Missing information using Accounting Ratios
If Gross Profit is expressed as a percentage of the cost price. In order words, Mark up is given.
Mark up = Gross Profit/Cost price
Example
Calculate the Gross profit if the Sales = $54,000, Mark up is 20%.
Goods costing $100 has been sold at $120.
If sales are $54000 then the Gross Profit = 20/120 * 54,000= $9000
If Gross Profit is expressed as a percentage of selling price i.e. Gross profit margin.
Gross profit margin = Gross profit/ Selling price
If Stock turnover ratio is stated
Stock turnover is the rate at which the stock of goods is sold.
Stock turnover= Cost of goods sold/ Average stock
Example
Cost of goods sold= $3000
Opening Stock= $400
Closing Stock = $600
Average Stock = | $400+$600 | = $500 |
2 |
Therefore, Stock turnover = $3000/$500 = 6 times per year or 2 months
