Why Would a Retailer Measure Direct Product Profitability (DPP)

question 33

Multiple Choice

Why would a retailer measure direct product profitability (DPP) ?

• A) because DPP is highly correlated with the gross margin on a product
• B) because handling expenses are negligible compared with gross margin
• C) because handling costs can make products less profitable
• D) because gross margin on a product is too difficult to measure accurately
• E) because DPP removes the impact of paperwork expenses

---

Definitions:

Quick Ratio

A liquidity metric that measures a company's ability to cover its short-term obligations with its most liquid assets, excluding inventory.

Quick Assets

Assets that can be quickly converted into cash without losing value, including cash, marketable securities, and accounts receivable.

Cash Equivalents

Brief-term investments with high liquidity, capable of being readily turned into fixed cash sums, and facing a negligible risk of value shifts.

Receivables

Amounts owed to a company by its customers from the sale of goods or services on credit.