What is calculated by dividing gross profit by net sales?

The correct answer, which is Gross Profit Margin, is calculated by dividing gross profit by net sales. This metric provides insight into how efficiently a company produces its goods in relation to its sales. The gross profit margin reflects the percentage of revenue that exceeds the cost of goods sold, indicating how much money is left over from sales after covering the cost of production.

A higher gross profit margin suggests that a company is able to sell its products at a price significantly above the cost to produce them, which is typically a sign of strong business efficiency and pricing strategy. This ratio is important for internal company analysis and for investors assessing a company's profitability.

The other options refer to different financial metrics: the Gross Profit Ratio is similar but typically used interchangeably in some contexts, while Net Profit Margin considers all expenses, including operating expenses, taxes, and interest, instead of just the cost of goods sold. Earnings Per Share Ratio calculates the profit attributed to each share of stock, which is a different measure of company performance. Thus, the correct answer specifically reflects the relationship between gross profit and sales revenue.