In transfer pricing analysis, how is the Berry ratio calculated?
Question and options
In transfer pricing analysis, how is the Berry ratio calculated?
EBITDA divided by shareholders’ funds
Long-term debt divided by shareholders’ funds
Gross profit divided by operating expenses
Net profit divided by gross profit
Answer and explanation
Correct answer: C - Gross profit divided by operating expenses
The Berry ratio, a profit level indicator used under the transactional net margin method for distributors and service providers, is gross profit divided by operating (value-adding) expenses. Net profit divided by gross profit is a margin of a different kind and does not measure the return on operating expenses.
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