If net sales is growing at a greater rate than cost of goods sold,which of the following will always be true?
A)The gross margin ratio will decrease.
B)The gross margin ratio will increase.
C)Net income will increase.
D)Net income will decrease.
E)None of the answer choices is correct.

Question

Quizplus · Accepted Answer

If net sales are growing at a greater rate than cost of goods sold, then the gross margin ratio (gross profit divided by net sales) will increase. This means that the company is generating more profit per dollar of sales, which can lead to an increase in net income. However, this does not necessarily mean that net income will always increase, as there could be other expenses that offset the increase in gross margin.

If Net Sales Is Growing at a Greater Rate Than