Ratio analysis of a company’s performance as shown in its profit and loss account may show a decline in profit margin (gross profit as a percentage of sales revenue) compared with the previous period.Required:Give five possible reasons for a decline in gross profit as a percentage of sales revenue from one year to the next, briefly explaining for each why it has the effect of reducing the percentage.Note: You are not required to consider factors, which reduce gross profit itself, only those that reduce the gross profit percentage of sales.

The decrease in the gross profit ratio may be due to the following reasons: Decrease in the selling…

Answered: Ratio analysis of a company’s…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

100%

Ratio analysis of a company’s performance as shown in its profit and loss account may show a decline in profit margin (gross profit as a percentage of sales revenue) compared with the previous period.

Required:

Give five possible reasons for a decline in gross profit as a percentage of sales revenue from one year to the next, briefly explaining for each why it has the effect of reducing the percentage.

Note: You are not required to consider factors, which reduce gross profit itself, only those that reduce the gross profit percentage of sales.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions