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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