What is the berry ratio?
The ratio of the berry is a financial ratio that investors and other business evaluators use as a means to determine the profitability of a particular company. The ratio, which is designed by US economist Charles Berry, is determined by the division of gross profit of the company by its operating costs. The ratio of berries more than one suggests that society earns enough money to cover its operations, while the ratio of less than one may indicate serious financial instability. This ratio is best used as an indicator of financial force only if it is verified by other profitability measurements. Profitability makes it possible to reinvest your profits even more to build business. Obviously, this also means a lot for business owners who reap the most rewards from these profits. Everyone from investors to tax officials desires to assess the profitability of the company, the protome of the berry is so important measurement.
calculationThe berry ratio requires that the company gain gross profits and the distribution of this total number of operating costs of the company during the same period. Imagine, for example, a company that has a gross profit of $ 100,000 (USD) of gross profit in a given year and in the same year $ 80,000 in costs. The ratio in this case would be $ 100,000 divided $ 80,000, ie $ 1,25. This means that the company could cover all its expenses and still have 25 percent of their profits remaining.
gross profit takes into account the amount of money it needs to produce the goods sold. Included in operating costs is all costs necessary to maintain business, such as wages or rental payments. If the ratio of berries is more than one, it means that the company could cover all its expenditures immediate and still money for profit.
As with all conditions, the berry ratio is best studied compared to other similar businesses. This is particularly true of the case thatE Investors use this ratio as a measurement of financial strength, because companies from different industries may have different financial reality that causes different standards for profitability. Those who use this ratio as a method of tax for tax purposes should be used in accordance with other profitability measurements to ensure that the results of the ratio are accurate.