A Sharp Decrease in the Gross Profit Percentage Is a Potential

question 69

True/False

A sharp decrease in the gross profit percentage is a potential indicator of trouble.

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Definitions:

Net Profit Margin

A financial ratio indicating the percentage of revenue that remains as profit after all expenses are deducted.

Gross Margin

The difference between sales revenue and cost of goods sold, representing the profitability before deducting selling and administrative expenses.

Return On Total Assets

A financial ratio that measures how effectively a company is using its assets to generate profit, calculated as net income divided by total assets.

Return On Equity

A measure of financial performance calculated by dividing net income by shareholder's equity, indicating how well a company uses investments to generate earnings growth.