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Net Profit Ratio and Gross Profit Ratio

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costargh:
Hmm, kinda confused with this.

In what instances can GPR decrease but NPR increase?

-when the mark up decreased (perhaps due to increases in the cost of stock [flow on effect to COS]), causing a decrease in Gross profit which decreased GPR, but expenses which dont effect GPR such as wages decreased (where labour productivtiy increased, counteracting any possible argument that a decrease in wages would decrease sales revenue thereby leading to a fall in NPR also.)

Can someone please explain this to me? :(

ben4386:

it would be that expenses decrease at a faster rate than the mark up decrease(i.e. possibly an increase in cost price and decrease in selling price) because then the rate in which expenses decrease would counteract the loss due to the mark up decreasing.

i think you understand it well tho what you are saying makes sense

ash_dhs:
another factor could be that other revenue during the period had increased by more than the change in COGS
this isnt very common in a real life situation, however they perhaps earned substantial discount revenue, interest revenue etc
this would increase NP and thus the NPR
hope it made some sense and helped...

costargh:
ohh thanks. yep makes sense

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