Tag: Net Profit Margin

The profit margins of Alex Trading Ltd over two years showed the following information at the 31 March year-end

• Gross profit margin: Year 1 – 37.2% AND Year 2 – 39.1 %
• Net profit margin: Year 1 – 12.2% AND Year 2 – 11.8 %

What combination of factors could have caused these changes?

Select ONE answer:

1. a change in the combination of goods sold leading to lower selling costs
2. a loss of trade discounts on purchases but an increase in cash discounts taken from suppliers
3. an advertising campaign to promote higher sales leading to higher selling prices
4. an increase in both production and selling costs

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct
4. Not correct

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