A company's gross profit percentage increased from 37% to 41%. What does this mean?

Question

Quizplus · Accepted Answer

A higher gross profit percentage means that the company is able to generate more profit from each sale after accounting for the cost of goods sold. This can happen either by increasing sales prices or decreasing the cost of goods sold. In this case, the increase in gross profit percentage suggests that the company was able to decrease the cost of goods sold as a percentage of net sales, which is reflected in the lower ratio from 37% to 41%. Option A is the opposite of what is happening here. Option C is talking about operating expenses, which may or may not be related to the change in gross profit percentage. Option D is incorrect because there is information given about the increase in gross profit percentage.

A Company's Gross Profit Percentage Increased from 37% to 41