Memorandum Flashcards
1
Q
Earning Capacity Definition
A
Earning capacity is the ability to earn income within the current financial structure of the business.
2
Q
Gross Profit Ratio Definition
A
The gross profit ratio indicates the ability of an enterprise to generate an acceptable net profit, return on owner’s investment and whether it can meet its other operating expenses.
3
Q
Net Profit Ratio Definition
A
The purpose of the net profit ratio is to show the effectiveness of managers to minimise expenses per dollar of sales.
4
Q
The Rate of Return on Owner’s Equity Definition
A
The rate of return on owners equity indicates the return on the owner’s investment in the business.
