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Which one of the following ratios is a common analytical tool used by merchandise corporations, but not by service corporations?

a. Gross profit ratio
b. Earnings per share
c. Profit margin
d. Current ratio

User TommyG
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1 Answer

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Final answer:

The gross profit ratio is used by merchandise corporations to measure the percentage of revenue exceeding the cost of goods sold and is not commonly used by service corporations, which don't have a traditional cost of goods sold.

Step-by-step explanation:

The ratio that is a common analytical tool used by merchandise corporations but not by service corporations is the gross profit ratio. This ratio is particularly useful for companies that sell tangible goods since it measures the percentage of revenue that exceeds the cost of goods sold. However, service corporations typically do not have a cost of goods sold in the same sense as merchandise companies because they do not sell physical products, meaning the gross profit ratio is less relevant for them.

User Kevin Cline
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