If an entity's selling and distribution expenses to sales ratio increases from 2.5% in one year to 3.8% the following year,this indicates that:
A) the entity has become more efficient in controlling its selling and distribution expenses over the period.
B) the entity has become less efficient in controlling its selling and distribution expenses over the period.
C) selling and distribution expenses are a lower percentage of sales.
D) the entity's profitability has decreased.

Question

Quizplus · Accepted Answer

An increase in the selling and distribution expenses to sales ratio from 2.5% to 3.8% indicates that the entity has become less efficient in controlling its expenses over the period. This may lead to lower profitability since the entity is spending a higher percentage of its sales on these expenses.

If an Entity's Selling and Distribution Expenses to Sales Ratio