If a company increases the selling price of the product it sells and all other data on the financial statements remains the same,which of the following ratios will be unaffected?
A)Fixed asset turnover
B)Net profit margin
C)Inventory turnover
D)Earnings per share

Question

Quizplus · Accepted Answer

If sales revenue increases and all other data on the financial statements remains the same,there will be an increase in gross profit (sales revenues minus cost of goods sold),an increase in operating income,and an increase in net income.The fixed asset turnover ratio increases because its numerator is net sales revenue which has been increased.The net profit margin and earnings per share increase because both ratios have net income in their numerators.Inventory turnover is not affected by an increase in the selling price since neither cost of goods sold (numerator)nor the average inventory (denominator)is impacted by an increase in the selling price.

If a Company Increases the Selling Price of the Product