Of what value is the calculation of gross profit margin?
A) The gross profit margin helps the analyst assess the capital structure of the firm.
B) The gross profit margin allows the analyst to determine if the firm has been affected by inflation.
C) The gross profit margin indicates the profitability of a firm after considering all operating expenses.
D) The gross profit margin is the first step of profit measurement indicating how much profit the firm generates after deducting cost of goods sold.

Question

Quizplus · Accepted Answer

The gross profit margin is the percentage of revenue that remains after deducting the cost of goods sold. It is a crucial metric for businesses as it helps them determine their profitability and pricing strategies. The calculation of gross profit margin is the first step in measuring profits, as it indicates how much profit a firm generates after deducting its cost of goods sold. Option A is incorrect as it pertains to capital structure, which is unrelated to gross profit. Option B is incorrect as inflation affects the cost of goods sold, not the gross profit margin. Option C is incorrect as it references operating expenses, which are not included in the calculation of gross profit margin.

Of What Value Is the Calculation of Gross Profit Margin