The following information is from Megabux, Inc.'s annual report for the years ended December 31:

-Refer to the Megabux annual report above.Which of the following describes the trend in the profit margin ratio for the three-year period?
A)The ratio is getting worse because expenses are growing faster than sales.
B)The ratio is getting worse because Megabux has increased its selling prices.
C)The increase in sales each year is more than enough to cover the increase in expenses.
D)There is no significant change in the ratio over the three years.

Question

The following information is from Megabux, Inc.'s annual report for the years ended December 31:

-Refer to the Megabux annual report above.Which of the following describes the trend in the profit margin ratio for the three-year period?
A)The ratio is getting worse because expenses are growing faster than sales. 
B)The ratio is getting worse because Megabux has increased its selling prices. 
C)The increase in sales each year is more than enough to cover the increase in expenses. 
D)There is no significant change in the ratio over the three years.

Quizplus · Accepted Answer

The profit margin ratio worsens when expenses grow faster than sales, reducing the net income relative to sales.

The Following Information Is from Megabux, Inc