The gross margin ratio:
A) Is also called the net profit ratio.
B) Measures a merchandising firm's ability to earn a profit from the sale of inventory.
C) Is also called the profit margin.
D) Is a measure of liquidity.
E) Should be greater than 1.

Question

Quizplus · Accepted Answer

The gross margin ratio measures a merchandising firm's ability to earn a profit from the sale of inventory. Option A is incorrect because the net profit ratio is a measure of profitability that considers all expenses, not just the cost of goods sold. Option C is incorrect because profit margin can refer to both gross profit margin and net profit margin. Option D is incorrect because gross margin ratio is not a measure of liquidity. Option E is incorrect because the gross margin ratio can be less than or equal to 1.

The Gross Margin Ratio