Shortage in th Gross Profit Ratio

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MANI GUPTA (Querist)

16 August 2010 Sir I'm doing Audit of a trading firm where the Gp is around 4-5 %...
By making Comparative I came to know this year Gp has Fallen to 3.75% against previous year of 4.5%...
The ratio of purchases to sales was similar 96%.. but Closing Stock to Sales have Fallen from 4% to 2.5%...

Then I made a diff. Trading A/c for all the Components where I came to know about the food Products which are showing only .75% Gp to sales.

So plz tell what could be the matter in this case... Plz tell all other alternatives that I can do...
Thanx in Advance..
Plz reply.. U can ask other things also in relation to this

MANI GUPTA

MANI GUPTA (Querist)

16 August 2010 I also checked the margin of Food Products Sales & Purchase.. It was coming 5% but not in Books

MANI GUPTA

MANI GUPTA (Querist)

16 August 2010 Plz reply

Thrissurkkaran Ishtan

Thrissurkkaran Ishtan (Expert)

16 August 2010 Did u enquire into any possible reasons for the falling GPR? Discounted sales, increase in RM cost, etc?

To answer the question mathematically, pls also let me know what was ratio of opening stock to Sales. If the ratio of opening stock to sales was same as PY, then, the GP ratio could come down due to better stock management as you mentioned. Also let me know the ratio of closing stock to opening stock.

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