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Below are amounts found in the income statements of three companies. Company Sales Revenue Cost of Goods Sold Operating Expenses Non-operating Expenses Income Tax Expense Henry $38,000 $ 13,300 $ 5,300 $2,300 $2,300 Grace 41,000 27,880 13,400 7,300 0 James 46,000 27,600 3,300 0 3,300 2-a. For each company, calculate the gross profit ratio.

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Answer and Explanation:

The computation of the gross profit ratio for each company is shown below:

As we know that

Gross profit ratio is

= Gross profit ÷ sales revenue

= (Sales revenue - cost of goods sold) ÷ sales revenue

For henry

= ($38,000 - $13,000) ÷ ($38,000)

= 66%

For grace

= ($41,000 - $27,880) ÷ ($41,000)

= 32%

For James

= ($46,000 - $27,600) ÷ ($46,000)

= 40%

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