Financial analysts and managers use the gross profit percentage as a measure of profitability and inventory turnover as a measure of efficient asset use.

Question

Quizplus · Accepted Answer

This statement is correct. The gross profit percentage is calculated by subtracting the cost of goods sold from total revenue and then dividing that number by total revenue. It is used to determine the effectiveness of a company's pricing strategy and ability to control costs. Inventory turnover is calculated by dividing the cost of goods sold by average inventory. It is used to measure how efficiently a company is using its inventory to generate revenue.

Financial Analysts and Managers Use the Gross Profit Percentage as a Measure