Textbook Problem

Which of the following statements is true with regard to the gross profit ratio?

1. An increase in cost of goods sold would increase the gross profit rate (assuming sales remain constant).

2. An increase in the gross profit rate may indicate that a company is efficiently managing its inventory.

3. An increase in selling expenses would lower the gross profit rate.

a. 1 c. 1 and 2

b. 2 d. 2 and 3