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Good afternoon, You said the net profit margin ration increases/improves when Profitability /sales price increases. As the net profit calculated after reducing the Cost of sales from revenue and then operating expences from Gross profit.
So, Will the N.P margin ratio will increase if the operating expences increases and cost of sales reduces ? As both Operating exp. and cost of sales affter Net profit.
Also, To comment on the rations and variances when asked, How much am i supposed to write.
If the operating expenses increase and the cost of sales decrease, then the net profit % may increase or decrease – it depends on whether the increase in operating expenses if more or less than the decrease in the cost of sales.
As far as how much you are expected to write, it depends on how many marks are available. You are never expected to write as much as the examiner write in his answers – usually a couple of lines is sufficient.
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