Series 79 practice questionmediumProfitability Ratios
Which scenario would most likely cause a company’s gross margin to decrease?
- ARising raw material costs with no change in sales price✓ Correct answer
- BRising sales prices with fixed costs
- CLower operating expenses
- DIssuing new equity
Explanation
Why A — Rising raw material costs with no change in sales price
Higher raw material costs without offsetting sales price increases reduce gross margin. B improves gross margin; C affects net and operating margins, not gross; D does not impact gross margin.
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