Which of the following is true of the gross profit percentage?
A)Gross profit percentage is the same for companies in all industries.
B)Gross profit percentage is used to measure the solvency of a company.
C)The gross profit percentage is one of the most carefully watched measures of profitability.
D)Service companies are required to calculate gross profit while preparing the Income Statement.

Question

Quizplus · Accepted Answer

The gross profit percentage is one of the most carefully watched measures of profitability, as it indicates the profitability of a company's sales after cost of goods sold has been deducted. A higher gross profit percentage is generally desirable, as it indicates that a company is able to earn more profit from each sale. However, the acceptable range of gross profit percentage can vary depending on the industry in which the company operates. The other options are incorrect; gross profit percentage can vary by industry, it is not used to measure solvency, and service companies may not have cost of goods sold to calculate gross profit.

Which of the Following Is True of the Gross Profit