Question

Based on the following information from ABC Company's financial analysis, which one of the following statements is NOT true?

Answer 1

Answer:

ABC Company

Financial Analysis:

A. The cost of goods sold has been increasing over the five years.

Explanation:

The gross profit ratio was 58.3% in year 1 and continued a downward spiral to 41.3% in year 5.  This depicted an underlying fact that the cost of goods sold had been increasing over the years.  The cost of goods sold influences the gross profit, and with the sales value remaining stable over the years, the ability of the company to generate enough profit out of its sales had been impaired greatly.  Fortunately, for ABC Company, the increasing cost of goods sold did not increase alongside the fixed costs of running the business.  This resulted to an increasing net profit ratio over the same period.