Consider the following:
Code:
A = Gross profit to net sales ratio
B = Gross profit to cost of goods sold ratio
Which equation is correct?

Question

Consider the following: 
Code:
A = Gross profit to net sales ratio
B = Gross profit to cost of goods sold ratio
Which equation is correct?

Quizplus · Accepted Answer

The gross profit to net sales ratio (A) can be calculated by dividing the gross profit by the net sales. 
Similarly, the gross profit to cost of goods sold ratio (B) can be calculated by dividing the gross profit by the cost of goods sold. 
So, rearranging the equation for B, we get: B = Gross profit / Cost of goods sold. 
Substituting this in the given options, we see that option D gives us the correct equation: A = B / (1 + B).

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