Gross profit and net profit ratios for Forest Fences Which statement best describes the situation represented in the graph? (A) Year 1 was a period of decreasing expenses and Year 2 was a period of increasing expenses - HSC - SSCE Business Studies - Question 12 - 2003 - Paper 1

To analyze the graph, we observe that the gross profit ratio remains constant from Year 1 to Year 2, while the net profit ratio declines. This indicates that although sales performance improved in Year 1 as reflected by stable gross profit, the net profit was adversely affected in Year 2, possibly due to increasing costs or decreasing income. Therefore, option (C) accurately describes the situation where Year 1 had improved sales performance, but Year 2 experienced a decline in net profit, indicating decreasing expenses.