Profit Margins

What is the formula for calculating Gross Profit Margin?

Which of the following best describes Net Profit Margin?

• It measures the percentage of revenue that exceeds the cost of goods sold.

• It measures the percentage of revenue that remains after all expenses have been deducted.

• It measures the percentage of revenue that remains after operating expenses have been deducted.

• It measures the percentage of revenue that remains after tax expenses have been deducted.

If a company has a Gross Profit of £200,000 and Total Revenue of £500,000, what is its Gross Profit Margin?

• 20%

• 30%

• 40%

• 50%

A company has a Net Income of £50,000 and Total Revenue of £250,000. What is its Net Profit Margin?

• 10%

• 15%

• 20%

• 25%

Which of the following strategies can improve a company's Gross Profit Margin?

• Increasing the cost of goods sold

• Reducing the selling price of products

• Increasing sales volume without increasing costs

• Increasing operating expenses

What is the primary focus of Profit Margin Analysis?

• To determine the total revenue of a company

• To assess the efficiency of a company's production process

• To evaluate the profitability of a company

• To calculate the total expenses of a company

Which of the following is NOT a way to improve Net Profit Margin?

• Reducing operating expenses

• Increasing sales prices

• Increasing the cost of goods sold

• Reducing tax expenses

If a company wants to improve its profit margins, which of the following should it prioritise?

• Increasing the number of employees

• Reducing unnecessary expenses

• Increasing the cost of raw materials

• Expanding office space

What does a high Gross Profit Margin indicate about a company?

• The company has high operating expenses.

• The company is efficient in managing its production costs.

• The company has low net income.

• The company is not profitable.

Which of the following is a potential drawback of focusing solely on improving profit margins?

• It may lead to increased customer satisfaction.

• It may result in reduced product quality.

• It may increase employee morale.

• It may lead to higher sales volume.