All of the following statements regarding the gross profit ratio are true except:
A) Managers, investors, and creditors use the gross profit ratio to measure one aspect of profitability.
B) The gross profit ratio alone is sufficient to determine a company's profitability.
C) If a company's net sales were $200,000 and cost of goods sold were $120,000, its gross profit ratio would be 40%.
D) The gross profit ratio explains how many cents on every dollar are available to cover
Expenses other than cost of goods sold and to earn a profit.

Question

Quizplus · Accepted Answer

The gross profit ratio alone is not sufficient to determine a company's overall profitability, as it only measures the gross profit relative to sales and does not take into account other expenses such as operating expenses and taxes.

All of the Following Statements Regarding the Gross Profit Ratio