What Is a Difference Between the Profit Margin and the Gross

question 12

Multiple Choice

What is a difference between the profit margin and the gross profit rate?

• A)None, these are interchangeable terms.
• B)The gross profit rate is computed by dividing net sales by gross profit and the profit margin is computed by dividing net sales by net income.
• C)The gross profit rate will normally be higher than the profit margin ratio.
• D)A profit margin of 7% means that 7 cents of each net sales dollar ends up in net income and a gross profit rate of 7% means that the cost of the goods were 7% of the selling price.

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Definitions:

Cyclopentene

A cyclic alkene with a five-membered ring, used in the synthesis of more complex organic compounds.

Positively Correlated

A relationship between two variables where both either increase or decrease together.

Portfolio

A conglomerate of monetary investments incorporating shares, debentures, material goods, cash on hand, and assets akin to cash, inclusive of mutual funds and ETFs.

Mean

The average of a set of numbers, calculated by dividing the sum of all numbers by the count of numbers.