$$rac{{{ ext{Gross Profit}}}}{{{ ext{Gross Sales}}}} imes 100$$
$$rac{{{ ext{Gross Profit}}}}{{{ ext{Net Sales}}}} imes 100$$
$$rac{{{ ext{Net Profit}}}}{{{ ext{Gross Sales}}}} imes 100$$
$$rac{{{ ext{Gross Receipts}}}}{{{ ext{Net Sales}}}} imes 100$$
Answer is Wrong!
Answer is Right!
The correct answer is A.
Gross profit ratio is a measure of profitability that indicates how much profit a company makes on each dollar of sales. It is calculated by dividing gross profit by net sales and multiplying by 100.
Gross profit is the difference between revenue and cost of goods sold. Net sales is revenue minus sales returns and allowances.
A high gross profit ratio indicates that a company is efficient at converting sales into profit. A low gross profit ratio indicates that a company may be struggling to control costs.
Here is a brief explanation of each option:
- Option A: This is the correct formula for calculating gross profit ratio.
- Option B: This formula calculates net profit margin, which is a different measure of profitability.
- Option C: This formula calculates return on sales, which is another measure of profitability.
- Option D: This formula calculates gross receipts ratio, which is not a common measure of profitability.