Question

QUESTION 2 ma od indicator of credit ability to grow sales while remaining profitable ce a bility to increase company expenses while remaining pro the r that is necessary about management's ability to compet of the status and direction of a business financial health al and loml b. 1. ll and IV only. c I and IV only. d. II, III and IV only

Answer 1

The gross margin also called as gross profit margin is the ratio of gross profit and sales.Gross profit is the difference between sales and cost of goods sold .

Gross margin is one of the indicator of credit risk , the reason being that it reflects the managements ability to increase sales and expenses while remaining profitable .It helps the firm to meet expenses such as administration expense , selling and distribution expenses from the margin left over.It indicates the portion of each dollar of revenue that the company retains as gross profit.

It also indicates the status and direction of business health because it helps to know the production cost related to revenue and measure the efficiency or compare two companies of different market capitalization.

Thus the answer is : b . 1, 2 and 4 only