Question 2

The table below shows two profitability ratios calculated for ABC Ltd and XYZ ltd for the period ended 31 Dec 2022:

Ratio	ABC Ltd	XYZ Ltd
Gross profit margin	40%	15%
Operating profit margin	10%	10%

Which of the following statements is an incorrect interpretation of the two ratios:

The two companies generated the same amounts of operating profits in 2022.

ABC Ltd has a higher gross profit margin compared to XYZ Ltd.

The ratios suggest that ABC Ltd could be better at managing their cost of sales, compared to XYZ ltd.

The ratios suggest that XYZ Ltd seems to have the characteristics of a price-competitive business, in comparison to ABC Ltd.