Which of the Following Statements About the Profit Margin Is

question 32

Multiple Choice

Which of the following statements about the profit margin is NOT true?

• A) The profit margin indicates the percentage of sales revenue that ends up as profit.
• B) The profit margin gives some indication of pricing strategy or competition intensity.
• C) A supermarket would be expected to have a high profit margin.
• D) The profit margin is a useful measure of performance.

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Definitions:

Transfer Price

The price charged for goods and services transferred between departments or divisions of the same company or between related entities.

Buying Division

A department within a company responsible for purchasing goods, materials, and services required for the business operations.

Negotiated Transfer Price

A transfer price agreed upon by the selling and buying divisions within the same company.

External Market Price

The price at which goods or services are bought and sold outside of a company, determined by the supply and demand in the wider market.