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What is Understanding Gross Profit Ratio about?
The gross profit ratio expresses the relationship between gross profit and net sales as a percentage. It is calculated by taking the gross profit and dividing it by net sales, then multiplying by 100. A higher gross profit ratio is generally better, though it can vary between businesses. Factors that can impact the ratio include changes in selling prices, costs of goods sold, stock valuations, and sales volume. Analyzing the ratio alongside purchasing and pricing policies provides useful insights.
- Author
- Shahzad Ahmed
- Language
- EN