Chapter 4, Problem 2AA

To determine

Net Sales:

It is the amount of sales of a company which comes after reducing sales returns and allowances, sales discount.

Gross margin ratio:

It means the ratio of gross profit earned to net sales. Formula to compute it:

  $\text{Gross}\text{Margin}\text{Ratio}=\frac{\text{Gross}\text{Profit}}{\text{Net}\text{Sales}}$

Gross margin:

It means the amount of profit which is computed after deducting Cost of goods sold from Net sales.

  $\text{Gross}\text{margin}=\text{Net}\text{sales}-\text{Cost}\text{of}\text{goods}\text{sold}$

1.

To Compute: Gross margin and Gross margin ratio for two years.

2.

To determine

To Identify: Company earning more gross margin and having better ratio in comparison to industry average.

3.

To determine

To Identify: Gross margin ratio improved or declined.3