Question

Little Deer Industries gathered the following year-end data (in thousands) for 2010 and 2009:

	2010	2009
Current Assets	$525	$465
Long-Term Assets	885	585
Current Liabilities	385	385
Long-Term Liabilities	575	575
Owners' Equity	575	265
Net Sales	975	775
Gross Margin	485	365
Net Income	255	100

The gross margin percentage for 2010 was:

A) 35.0%

B) 45.1%

C) 49.7%

D) 52.3%

Answer 1

Correct answer is C

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Gross margin ratio is the ratio of gross profit of a business to its revenue. It is a profitability ratio measuring what proportion of revenue is converted into gross profit

Gross margin = Gross profit/ revenue

                            = 485/ 975

                            = 0.4974 or 49.74%

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