A Company's Gross Profit Was $83,750 and Its Net Sales

question 58

Multiple Choice

A company's gross profit was $83,750 and its net sales were $347,800. Its gross margin ratio equals:

• A) 4.2%.
• B) 24.1%.
• C) 75.9%.
• D) $83,750.
• E) $264,050.

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Definitions:

Depreciation Expense

The systematic allocation of the cost of a tangible asset over its useful life, representing the asset's consumption or the loss of its value over time.

Net Income

The total earnings of a company after subtracting all expenses from revenue, including taxes and operating costs, often referred to as the bottom line.

Indirect Method

The indirect method is a widely used approach for preparing the cash flow statement, where net income is adjusted for changes in balance sheet accounts to calculate cash flow from operating activities.

Accounts Payable

Obligations or debts owed by a company to its creditors or suppliers for goods and services received but not yet paid for.