Grimball Corporation’s gross profit margin has remained fairly constant for the past several years. Which one of the following is the best explanation?

Answer (A) is correct. Gross profit margin is the percentage of gross revenues that remains with the firm after paying for merchandise. The key analysis with respect to the gross profit margin is whether it is keeping up with the increase or decrease in sales. For example, a 10% increase in sales should be accompanied by at least a 10% increase in the gross profit margin.