Question

Jia Ltd. has a Gross Profit Ratio of 20%. To maintain this ratio at 30%, management may

Options

• Increase selling price of Stock-in-Trade.

• Reduce Cost of Revenue from Operations.

• Increase selling price of Stock-in-Trade and to reduce Cost of Revenue from Operations.

• All of the above.

Answer 1

All of the above.

Explanation:

The Gross Profit Ratio increases when the gap between the selling price and the cost of goods sold expands. Management can achieve this by either increasing the selling price to boost revenue, reducing the cost of revenue from operations to lower expenses, or doing both simultaneously, making all options valid methods to reach the 30% target.