alleryGross profit is $580,000 and sales are $994,000. What is the gross profit percentage (to one decimal)?
A24.9%
B41.6%
C58.4%
D63.1%
Answer & Solution
Correct answer: C. 58.4%
1. Gross profit percentage = gross profit / sales.
2. = $580,000 / $994,000.
3. = 0.584 = 58.4%.
4. Trap: 41.6% (option B) is the cost of merchandise sold percentage (cost / sales), not gross profit.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §7.3.4 "Gross Profit Percentage", p.309_
Keep practising Analysis of Financial Statements
Browse all Analysis of Financial Statements questions for AP Intermediate 2nd Year, or explore more Accountancy topics.
Related questions
An investor divides profit available to common shareholders by the shares outstanding. ThaThree profitability measures are named together: return on total assets, return on equity A manager wants to know how hard the asset base is working to produce sales. She should usOperating efficiency ratios include total asset turnover, inventory turnover, days' sales A ratio checks whether a firm can cover its interest expense as it falls due. That ratio iTwo ratios are named for assessing solvency: debt-to-equity and:Lenders often look at the ratio built on the single most liquid asset a company holds. ThaA stricter test strips inventory and prepaid expenses out of current assets. That test is