Answer: Company A.

**Explanation:** Gross profit margin is calculated as: \[\text{Gross Profit Margin} = \frac{\text{Gross Profit}}{\text{Sales}} = \frac{\text{Sales} - \text{Cost of Sales}}{\text{Sales}}\] Let's calculate for each company: **Company A:** - Sales: $40,000 - Cost of sales: $21,000 - Gross profit = $40,000 - $21,000 = $19,000 - Gross profit margin = $19,000 / $40,000 = 0.475 or 47.5% **Company B:** - Sales: $200,000 - Cost of sales: $110,000 - Gross profit = $200,000 - $110,000 = $90,000 - Gross profit margin = $90,000 / $200,000 = 0.45 or 45.0% **Company C:** - Sales: $450,000 - Cost of sales: $240,000 - Gross profit = $450,000 - $240,000 = $210,000 - Gross profit margin = $210,000 / $450,000 = 0.4667 or 46.67% **Comparison:** - Company A: 47.5% - Company B: 45.0% - Company C: 46.67% Company A has the highest gross profit margin at 47.5%, followed by Company C (46.67%), and then Company B (45.0%). **Key Points:** - Gross profit margin measures the percentage of revenue remaining after deducting the cost of goods sold. - It's a fundamental profitability metric that shows how efficiently a company produces and sells its products. - Higher gross margins indicate better pricing power, production efficiency, or lower input costs. - Note that other expenses (SG&A, operating expenses, interest, taxes) are not included in gross profit margin calculation.

Author: LeetQuiz .