In 20X2, C Co's gross proﬁt ratio was 70.4% and their proﬁt margin was 18.8%. In 20X2, P Co's gross proﬁt ratio was 58.3% and their proﬁt margin was 8.9%. Which of the following is false?
A) C Co's cost of goods sold was a lower percentage of sales than P Co's.
B) In 20X2, C Co's proﬁt margin was 111.2% greater than P Co's which would contribute to a higher return on total investment.
C) The major reason for P Co's lower proﬁt margin is that their selling, general and administrative expenses were double the percentage of sales compared to C Co's percentage.
D) C Co looks to be a better investment than P Co.

Question

Quizplus · Accepted Answer

The statement in C is false because it assumes specific percentages of selling, general, and administrative expenses without providing actual data to support that P Co's expenses were double that of C Co's as a percentage of sales. The information given only discusses gross profit ratios and profit margins, not specific expense categories.

In 20X2, C Co's Gross Proﬁt Ratio Was 70