How to Calculate the Gross Profit Ratio on Discounts and Returns
The gross-profit ratio of your business expresses the ratio between your gross profit and net sales. The cost of discounts and returns is calculated into gross profit normally. It is possible that you have some profit from discounts and returns, so you can determine the ratio between the profit on discounted and returned items and the net sales on those items.
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Instructions
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Calculate the gross profit on discounts and returns. Add the cost to you of the returned and discounted inventory with cost of the actual discounts and returns. Subtract that from the total amount the items would have sold for without any discounts and returns.
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Divide the gross profit by the net sales on the discount and returns.
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Multiply the result by 100. This is the gross-profit ratio on discounts and returns expressed as a percentage.
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