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Pizza & Pasta Restaurant Revenue statement year ended 30 June 2006 Sales $ 150 000 Cost of goods sold $ 105 000 Gross profit $ 45 000 Operating expenses Administrative $ 5 000 Selling & distribution $ 7 000 Financial $ 3 000 Net profit $ 30 000 (a) Identify and calculate ONE profitability ratio for Pizza and Pasta Restaurant. - HSC - SSCE Business Studies - Question 25 - 2006 - Paper 1
Question 25
Pizza & Pasta Restaurant Revenue statement year ended 30 June 2006 Sales $ 150 000 Cost of goods sold $ 105 000 Gross profit $ 45 000 Operating expense... show full transcript
Worked Solution & Example Answer:Pizza & Pasta Restaurant Revenue statement year ended 30 June 2006 Sales $ 150 000 Cost of goods sold $ 105 000 Gross profit $ 45 000 Operating expenses Administrative $ 5 000 Selling & distribution $ 7 000 Financial $ 3 000 Net profit $ 30 000 (a) Identify and calculate ONE profitability ratio for Pizza and Pasta Restaurant. - HSC - SSCE Business Studies - Question 25 - 2006 - Paper 1
Step 1
Identify and calculate ONE profitability ratio
Answer
One common profitability ratio is the Gross Profit Margin. It is calculated using the formula:
ext{Gross Profit Margin} = rac{ ext{Gross Profit}}{ ext{Sales}} imes 100Using the data from the Pizza & Pasta Restaurant:
- Gross Profit = $45,000
- Sales = $150,000
Substituting the values into the formula gives:
ext{Gross Profit Margin} = rac{45,000}{150,000} imes 100 = 30\%Thus, the Gross Profit Margin for Pizza & Pasta Restaurant is 30%.