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Fundamentals of financial accounting
CHAPTER 19 – THE INTERPRETATION OF FINANCIAL
STATEMENTS
19.1 D
Sales $40,000
Cost of sales $30,800
Gross profit $9,200
Gross profit margin = Gross profit/Sales Revenue
$9,200/$40,000
= 23%
19.2 B
The gearing ratio is the proportion of long-term loans to shareholders’ funds,
thus it follows that if a decrease in long-term loans if greater than a decrease in
the shareholders’ funds, the gearing ratio will fall.
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