Gross profit and net profit ratios: Class 12 practice
Gross profit ratio = gross profit ÷ revenue from operations × 100. Read the method, follow the three worked examples, then try the six questions.
What you should know first
- Percentages
The idea behind gross profit and net profit ratios
Gross profit ratio = gross profit ÷ revenue from operations × 100. Net profit ratio = net profit ÷ revenue from operations × 100. Gross profit = sales − cost of revenue.
Step-by-step method
- Find gross profit = sales − cost of revenue.
- GP ratio = GP/sales × 100.
- Net profit = GP − operating expenses (+ other income); NP ratio = NP/sales × 100.
Worked example 1 (Basic)
Sales ₹6,20,000, cost of revenue ₹4,52,600. Find the gross profit ratio.
- GP = ₹1,67,400
- GP ratio = 27%
- Answer: 27%
Worked example 2 (Standard)
Sales ₹7,70,000, cost of revenue ₹4,23,500, operating expenses ₹1,15,500. Find the net profit ratio.
- GP = ₹3,46,500, NP = ₹2,31,000
- NP ratio = 30%
- Answer: 30%
Worked example 3 (Challenge)
Sales ₹2,30,000, cost of revenue ₹1,56,400, operating expenses ₹13,800. Find the net profit ratio.
- GP = ₹73,600, NP = ₹59,800
- NP ratio = 26%
- Answer: 26%
Common mistakes and misconceptions
- Dividing by cost instead of sales
- Mixing gross and net profit
Practice questions
- (Basic) Sales ₹6,00,000, cost of revenue ₹3,90,000. Find the gross profit ratio.
- (Basic) Sales ₹1,30,000, cost of revenue ₹74,100. Find the gross profit ratio.
- (Standard) Sales ₹8,50,000, cost of revenue ₹5,52,500, operating expenses ₹85,000. Find the net profit ratio.
- (Standard) Sales ₹6,50,000, cost of revenue ₹4,03,000, operating expenses ₹97,500. Find the net profit ratio.
- (Challenge) Sales ₹1,10,000, cost of revenue ₹62,700, operating expenses ₹8,800. Find the net profit ratio.
- (Challenge) Sales ₹5,90,000, cost of revenue ₹4,30,700, operating expenses ₹70,800. Find the net profit ratio.
Answer key with full working
- Q1: GP = ₹2,10,000 → GP ratio = 35% → Answer: 35%
- Q2: GP = ₹55,900 → GP ratio = 43% → Answer: 43%
- Q3: GP = ₹2,97,500, NP = ₹2,12,500 → NP ratio = 25% → Answer: 25%
- Q4: GP = ₹2,47,000, NP = ₹1,49,500 → NP ratio = 23% → Answer: 23%
- Q5: GP = ₹47,300, NP = ₹38,500 → NP ratio = 35% → Answer: 35%
- Q6: GP = ₹1,59,300, NP = ₹88,500 → NP ratio = 15% → Answer: 15%
Syllabus note
This skill is listed under "Accounting Ratios" for Class 12 in the NCERT/CBSE books. ICSE, IGCSE, IB and state boards may teach it in a different chapter or year.
Answers on this page are generated and automatically re-checked by a second, independent calculation. They have not been reviewed by a teacher — if you spot a problem, tell us on WhatsApp.
Related practice and notes
- Current ratio and quick ratio
- Debt–equity ratio
- Inventory turnover ratio
- Trade receivables turnover
- Working capital and its turnover
- Return on investment (capital employed)
- Interest on capital and drawings
- New and sacrificing ratio on admission
- Gaining ratio on retirement
- Valuation of goodwill
- All Class 12 practice
Frequently asked questions
Which chapter is gross profit and net profit ratios in?
"Accounting Ratios", Class 12 Accountancy (NCERT/CBSE). Other boards may place it differently.
How were the answers checked?
Answers on this page are generated and automatically re-checked by a second, independent calculation. They have not been reviewed by a teacher — if you spot a problem, tell us on WhatsApp.