Which of the following is NOT typically included in the calculation of Gross Margin Ratio?

The Gross Margin Ratio is a financial metric that indicates the percentage of revenue that exceeds the cost of goods sold (COGS). It is calculated using gross profit and net sales. Gross profit is derived from subtracting COGS from net sales, reflecting the income a company makes from its direct production and sales before accounting for general expenses, taxes, and other costs.

The formula for calculating the Gross Margin Ratio is:

[ \text{Gross Margin Ratio} = \frac{\text{Gross Profit}}{\text{Net Sales}} ]

To break it down further, gross profit is included in the calculation as it represents the earnings from sales after accounting for COGS. Net sales, which refers to total sales revenue minus returns, allowances, and discounts, is also essential because it provides the revenue base against which gross profit is measured.

Cost of goods sold, while critical to determining gross profit, is not directly part of the ratio's final computation since the ratio focuses on gross profit as a percentage of net sales.

Net income, which encompasses all revenues and expenses including those not related to the cost of goods sold (like operating expenses, interest, and taxes), is not factored into the gross margin calculation. Thus, it is the item