In its 2016 annual report, Caterpillar Inc. reported the following (in millions): 2016 2015 Sales $38,537 $47,011 Cost of goods sold $28,309 $33,546 As a percentage of sales, did Caterpillar’s gross profit increase or decrease during 2016?

As a percentage of sales, Caterpillar’s gross profit decreased during 2016.

Explanation:

Gross profit is the net of Sales amount and cost of goods sold for the year. Gross profit is the profit earned from the activities of the business before incorporation of operating expenses.

                                              2016            2015

Sales                                    $38,537       $47,011

Less: Cost of goods sold   $28,309       $33,546

Gross Profit                         $10,228        $13,465

GP as percentage of sale    26.54%         28.64%

Working

GP 2016 = ( $10,228 / $38,537 ) x 100 = 26.54%

GP 2015 = ( $13,165 / $47,011 ) x 100 = 28.64%