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HMRC internal manual

Enquiry Manual

Examining Accounts: Business Ratios: Other Gross Ratios

The gross profit rate is a concept which is applicable to the sort of business where a product is bought and sold. The basic input to the business is the purchase of goods. For other businesses, this will not be the case. However, there may be some other ratio based on the prime profit generating inputs.

Ratios and calculations will obviously vary according to the business. With someone driving a taxi, the input is the fuel purchased to run the vehicle. In a manufacturing process it may be proper to take into account production wages as well as raw materials. You should not ignore such ratios although they may appear more complex than straightforward GPR. The efficient businessman or women will certainly be looking to them, and so will others who have an interest in the business, such as the bank manager.