Business – 10.2 Analysis of published accounts – Profitability ratios | e-Consult
10.2 Analysis of published accounts – Profitability ratios (1 questions)
Login to see all questions.
Click on a question to view the answer
Two plausible explanations are:
- Higher operating costs: If the firm’s fixed or variable operating expenses rose faster than sales (e.g., increased rent, salaries, or marketing spend), the proportion of profit left after all costs would shrink, lowering the net profit margin.
- Lower pricing or higher discounts: To achieve the 12% sales growth the company may have reduced selling prices or offered larger discounts, which would reduce revenue per unit and consequently the net profit margin, even though total sales volume rose.