The gross margin ratio
A)Measures a merchandising firm's ability to earn a profit from the sale of inventory
B)Is also called the profit margin ratio
C)Is also called the gross profit ratio
D)Measures a merchandising firm's ability to earn a profit from the sale of inventory and is also called profit margin ratio
E)Is also called the gross profit ratio and measures a merchandising firm's ability to earn a profit from the sale of inventory

Question

Quizplus · Accepted Answer

The gross margin ratio is also called the gross profit ratio and measures a merchandising firm's ability to earn a profit from the sale of inventory. Therefore, option E is the correct choice. Option A and B are incorrect because the gross margin ratio is not always synonymous with profit margin ratio. Option C is partly correct but does not include the information that it measures a firm's ability to earn a profit from the sale of inventory. Option D is incorrect as it duplicates the explanation given in option A.

The Gross Margin Ratio