This question was asked in Important Profitability Ratios

I don't understand how is higher is better gross profit

Sharmeen Niazi

Nov. 17, 2016, 9:57 p.m.

Answers!

Davneet Singh

Nov. 17, 2016, 10:41 p.m.

Hi Sharmeen

Suppose in first year

You made sales of 1 lacs and earned 20000,your GP Ratio is 20000/100000=20%

In Second year,

You made sales of 2 lacs and earned 50000,your GP Ratio is 50000/200000=25%

Hence,Second year performance is better as it has higher GP Ratio

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Sharmeen Niazi

Nov. 17, 2016, 9:58 p.m.

Sir plz provide video lecture about ratio analysis

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