Question

In its 2016 annual report, Caterpillar Inc. reported the following (in millions): 2016 2015 Sales $38,537 $47,011 Cost of goods sold 28,309 33,546 As a percentage of sales, did Caterpillar's gross profit increase or decrease during 2016? Select one: A. Gross profit increased from 26.8% to 28.6% B. Gross profit decreased from 28.6% to 26.5% C. Gross profit increased from 71.4% to 73.2% D. Gross profit decreased from 73.2% to 71.4% E. There is not enough information to answer the question.

Answer 1

B. Gross profit decreased from 28.6% to 26.5%

Step-by-step explanation:

As for the provided information, we have

Particulars Year 2016 Year 2015

Sales $38,537 $47,011

Cost of goods sold $28,309 $33,546

Gross Profit $10,228 $13,465

Gross profit as a percentage of sales shall be:

Year 2016 =
`(10,228)/(38,537) * 100 = 28.54`

Year 2015 =
`(13,465)/(47,011) * 100 = 28.64`

As the percentage is higher of 2015 by 0.1%

The statement B which states that the gross profit has reduced is correct.