Which of the Following Statements Is Not True Regarding the Gross

question 118

Multiple Choice

Which of the following statements is not true regarding the gross profit ratio?

• A)The gross profit ratio is calculated by dividing net sales by gross profit.
• B)The gross profit ratio is a measure of profitability.
• C)The gross profit ratio can help investors decide whether or not to buy a company's stock.
• D)The gross profit ratio should be compared with both a company's prior years' ratios and competitors'.

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Definitions:

Operating Activities

Activities that relate directly to the primary business operations of a company, such as selling goods and services.

Sale of Machinery

The transaction involving the disposal of machinery assets, either due to replacement, upgrading, or discontinuation of use, which can impact a company's financial statements.

Investing Activities

Transactions involving the purchase and sale of long-term assets and other investments, not including cash equivalents, as part of a company's financial operations.

Treasury Stock

Shares that have been issued by a company and then repurchased from the market, reducing the amount of outstanding stock on its balance sheet.