Florida General Contractor Practice Exam

What is the gross profit to sales ratio for a company with gross profits of 157,355 and sales of 629,420?

1. 24.98%

2. 15.79%

3. 18.99%

4. 20.15%

The correct answer is: 15.79%

To determine the gross profit to sales ratio, you divide the gross profit by the sales, and then multiply the result by 100 to convert it into a percentage. In this case, you have a gross profit of 157,355 and sales of 629,420. The formula for calculating the gross profit to sales ratio is: (Gross Profit / Sales) x 100 Substituting in the values: (157,355 / 629,420) x 100 = 0.2498 x 100 = 24.98% This calculation shows that 24.98% of the sales revenue contributes to gross profit, which indicates a relatively healthy profitability margin. The selected answer of 15.79% does not capture the correct ratio based on the computation, as the correct gross profit to sales ratio is 24.98%. Understanding how to calculate this ratio is crucial for assessing a company's profitability and managing financial health in construction projects or other ventures. Knowing the correct percentage allows contractors to evaluate and strategize their pricing and expense management effectively.