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Which of the following describes the change in both the gross profit ratio and expense ratio from 2019 to 2020? | Gross profit ratio (gross profit ÷ sales) | Expense ratio (total expenses ÷ sales) | |-------------------------------------------|-------------------------------------| | A - HSC - SSCE Business Studies - Question 18 - 2020 - Paper 1
Question 18
Which of the following describes the change in both the gross profit ratio and expense ratio from 2019 to 2020? | Gross profit ratio (gross profit ÷ sales) | Expens... show full transcript
Worked Solution & Example Answer:Which of the following describes the change in both the gross profit ratio and expense ratio from 2019 to 2020? | Gross profit ratio (gross profit ÷ sales) | Expense ratio (total expenses ÷ sales) | |-------------------------------------------|-------------------------------------| | A - HSC - SSCE Business Studies - Question 18 - 2020 - Paper 1
Step 1
Analysis of Gross Profit Ratio
Answer
The gross profit ratio is calculated as gross profit divided by sales. To determine if it improved or worsened from 2019 to 2020, one would need to compare the values of gross profit and sales from both years. If the ratio increased, it can be classified as 'Improved'; if it decreased, it is 'Worsened'.
Step 2
Analysis of Expense Ratio
Answer
The expense ratio is calculated as total expenses divided by sales. Similar to the gross profit ratio, to assess the change from 2019 to 2020, compare the total expenses and sales for the two years. An increase in this ratio indicates that expenses have become a larger portion of sales, meaning it has 'Worsened'; a decrease indicates that it has 'Improved'.
Step 3
Conclusion
Answer
Based on the evaluations, if both ratios indicated improvement or worsening consistently, the correct choice can be selected. From the provided options, option A indicates both ratios improved, while option D indicates both worsened. The data trends observed should dictate which option among A and D accurately reflects the changes over the years.