All of the Following Statements Regarding the Gross Profit Ratio

Multiple Choice

All of the following statements regarding the gross profit ratio are true except:

A) The gross profit ratio alone is sufficient to determine a company's profitability.
B) Managers, investors, and creditors use the gross profit ratio to measure one aspect of profitability.
C) The gross profit ratio explains how many cents on every dollar are available to cover expenses other than cost of goods sold and to earn a profit.
D) If a company's net sales were $200,000 and cost of goods sold were $120,000, its gross profit ratio would be 40%.