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)A service company must show its gross profit percentage in its Income Statement.

Question

Quizplus · Accepted Answer

The gross profit percentage is a measure of profitability and is closely watched by many companies. It is calculated by dividing gross profit by total revenue and multiplying by 100. Option A is incorrect because the gross profit percentage varies based on the industry. Option B is incorrect because the gross profit percentage is not used to measure solvency but rather profitability. Option D is incorrect because service companies may not have a gross profit percentage as they do not have cost of goods sold like a retail or manufacturing company.

Which of the Following Is True of the Gross Profit