All of the Following Statements Regarding the Gross Profit Ratio

question 105

Multiple Choice

All of the following statements regarding the gross profit ratio are true except:

• A)The gross profit ratio alone is sufficient to determine a company's profitability.
• B)Managers, investors, and creditors use the gross profit ratio to measure one aspect of profitability.
• C)The gross profit ratio explains how many cents on every dollar are available to cover expenses other than cost of goods sold and to earn a profit.
• D)If a company's net sales were $200,000 and cost of goods sold were $120,000, its gross profit ratio would be 40%.

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Definitions:

Debtor

An individual or entity that owes money or an obligation to another, called the creditor.

Shelter

A structure that provides protection from weather, danger, or discomfort.

Surety

Surety is a financial arrangement where a third party (the surety) guarantees the performance of a primary party's obligations or undertakes to fulfill the primary party's obligations if the primary party fails to do so.

Guarantor

An individual or party that guarantees to pay back a loan or fulfill another obligation if the primary party fails to do so.