Which of the following accurately describes the Gross Profit Margin calculation?

The calculation for Gross Profit Margin is defined as the difference between sales and the cost of goods sold, divided by sales. This calculation reflects how efficiently a company is producing and selling its products relative to their costs. Specifically, it measures the percentage of revenue that exceeds the cost of goods sold, providing insight into a company's financial health and pricing strategy.

Using the formula, (Sales - Cost of Sales) gives the gross profit, which is then divided by Sales to yield the Gross Profit Margin. This ratio is crucial for assessing the profitability of core business activities, and it allows for comparability across companies and industries by expressing profit as a percentage of total sales revenue.

In contrast, the other options pertain to various financial metrics but do not accurately represent the Gross Profit Margin. One of them, for instance, pertains to net profit or operating expenses, while others relate to ratios involving total assets or equity, which are not relevant to gross profit calculation. Understanding these distinctions is key in financial analysis and can guide better decision-making in business operations.