Question

The formula for calculating Gross ratio is?

• A. Total expenses/Gross income
• B. Fixed expenses/Gross income
• C. Operating expenses/Gross income
• D. Gross income/Total asset \( \times \) 100

Hint:

The Gross Ratio measures overall cost efficiency. Gross Ratio = Total Expenses / Gross Income. It shows how many dollars are spent to earn each dollar of gross income. A ratio less than 1 is desirable. Don't confuse it with Operating Ratio (Operating Expenses / Gross Income).

Answer 1

The Correct Option is A

Step 1: The Gross Ratio measures the share of gross income consumed by total farm expenses.
Step 2: Fixed expenses/Gross income and Operating expenses/Gross income only capture part of the expenses, not the total, so they are ruled out.
Step 3: Gross income/Total asset \( \times 100 \) measures asset returns, a different concept entirely.
Step 4: The correct formula is \[ \boxed{\text{Gross Ratio} = \frac{\text{Total Expenses}}{\text{Gross Income}}} \]