The gross margin ratio:
A) Indicates the percent of sales revenue remaining after covering the cost of the goods sold.
B) Should be greater than 1 for merchandising companies.
C) Is a measure of liquidity and should exceed 2.0 to be acceptable.
D) Is also called the net profit ratio.
E) Is also called the profit margin.

Question

Quizplus · Accepted Answer

The gross margin ratio is calculated by dividing the gross profit by sales revenue and indicates the percent of sales revenue remaining after covering the cost of goods sold. A higher ratio indicates a more profitable business, but there is no set benchmark for what is considered acceptable.

The Gross Margin Ratio