The Gross Margin Ratio

question 56

Multiple Choice

The gross margin ratio:

• A)Is also called the net profit ratio.
• B)Indicates the percent of sales revenue remaining after covering the cost of the goods sold.
• C)Is also called the profit margin.
• D)Is a measure of liquidity and should exceed 2.0 to be acceptable.
• E)Should be greater than 1 for merchandising companies.

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Definitions:

Implicit Cost

An indirect, non-payment expense represented by the opportunity cost of utilizing resources in a specific project instead of elsewhere.

Expected Profit Rate

The forecasted return on investment over a specific period, reflecting the potential profitability of a business endeavor.

Profit Rate

The ratio of profits earned to the amount of capital invested over a given period, indicating the efficiency of using capital in production.

Loan Syndicates

Groups of lenders or financial institutions that come together to provide large loans to a single borrower, spreading the risk among them.