Question

georgia is interested in selling her company. before seeking a buyer, she wants her income statements to show a trend of increasing gross profits. how can she achieve her goal? \bigcirc reduce taxes paid \bigcirc reduce operating expense \bigcirc reduce net sales \bigcirc reduce cost of goods sold

Explanation:

Gross profit is calculated as \( \text{Gross Profit} = \text{Net Sales} - \text{Cost of Goods Sold} \). To increase gross profit, we can either increase net sales or decrease the cost of goods sold (COGS).

• Reducing taxes paid affects net income (after - tax profit), not gross profit.
• Reducing operating expenses affects operating profit (which is calculated after gross profit), not gross profit.
• Reducing net sales would decrease gross profit (since net sales is in the numerator of the gross - profit formula).
• Reducing the cost of goods sold will increase gross profit because it is subtracted from net sales in the gross - profit calculation. So, reducing the cost of goods sold is the way to achieve the goal of increasing gross profits.

Answer:

D. Reduce cost of goods sold