Question

A company's net sales were $676,600, its cost of goods sold was $236,810 and its net income was $33,750. Its gross margin ratio equals:

Answer 1

Answer:

13.01%

Explanation:

Gross Margin Ratio = $\frac{Net Sales - Cost of Goods Sold}{Net Income}$

Gross Margin Ratio = $\frac{676,000 - 236,810}{33,750}$

Gross Margin Ratio = $\frac{439,190}{33,750}$

Gross Margin Ratio = 13.01%

Gross Profit Margin is represented as (Percentage) %. Now, the Gross profit margin is really worth investigating. It not only helps when comparing Gross Profit Margin with competitors but is also helpful in investigating and comparing previous year's Gross Profit Margin. If the Gross Profit Margin fallen there could be number of reasons for this, one might be the cost of goods sold has gone up. On contrary, on the other hand the increase in Gross Profit Margin might be because of increase in selling prices.