1. What is Cost Revenue Ratio?

The Cost Revenue Ratio (CRR) is a financial metric that shows what percentage of revenue is consumed by the cost of generating that revenue. It helps businesses understand their operational efficiency and profitability.

2. How Does the Calculator Work?

The calculator uses the CRR formula:

Where:

• Cost of Revenue — All direct costs associated with producing goods or services
• Total Revenue — Total income from sales before any expenses are deducted

Explanation: The ratio expresses cost as a percentage of revenue, with lower percentages indicating better efficiency.

3. Importance of CRR Calculation

Details: CRR helps businesses track operational efficiency over time, compare performance against industry benchmarks, and make informed pricing decisions.

4. Using the Calculator

Tips: Enter both cost and revenue in the same currency units. Cost must be ≥ 0 and revenue must be > 0 for valid calculation.

5. Frequently Asked Questions (FAQ)

Q1: What is a good Cost Revenue Ratio?
A: This varies by industry, but generally a lower CRR is better. Ratios below 60% are typically considered healthy for most businesses.

Q2: How is CRR different from profit margin?
A: CRR focuses only on direct costs, while profit margin considers all expenses. CRR shows operational efficiency, while profit margin shows overall profitability.

Q3: Should CRR be tracked monthly or annually?
A: Both are valuable. Monthly tracking helps spot trends, while annual figures provide broader performance assessment.

Q4: What causes CRR to increase?
A: Rising material costs, labor costs, production inefficiencies, or decreasing revenue can all increase CRR.

Q5: How can businesses improve their CRR?
A: Strategies include increasing prices (if market allows), reducing production costs, improving operational efficiency, or increasing sales volume to spread fixed costs.