The gross profit ratio (GP ratio) is a profitability ratio that depicts the connection between gross profit and total net sales revenue. It is a common method for assessing a company's operational success. The ratio is calculated by dividing gross profit by net sales. 

Advantages Of Gross Profit

Advantages Of Gross Profit

Comparing the business’s net sales to the company's gross profit.

The GP ratio will inform the customers about the margin of profit arising from the buying and selling and manufacturing activities of the company.

 It calculates how much the company earns more than the amount needed to cover its operating expenses. 

 Comparing the growth of the Gross Profit Ratio over time to determine the pace of corporate growth.