Economics · Financial Analysis
A company's Gross Profit Margin increased from 30% to 35%, but its Operating Profit Margin fell from 20% to 15% in the same year. Which of the following is the most plausible explanation for this trend?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The company changed its depreciation method for factory machinery from straight-line to reducing balance.
- 2The company faced higher raw material prices but managed to reduce its marketing budget.
- 3The company increased its selling prices, which led to a higher volume of sales and lower distribution costs.
- 4The company successfully reduced its cost of sales but faced a significant increase in administrative expenses.✓
Correct answer
The company successfully reduced its cost of sales but faced a significant increase in administrative expenses.
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