Profit Margin Ratio

Question 1

____________ is a profitability ratio that measures the amount of net income earned with each peso of sales generated by comparing the net income and net sales of a company

Answer 1

PROFIT MARGIN RATIO

Question 2

Creditors and investors use the Profit Margin Ratio to measure how effectively a company can __________

Answer 2

CONVERT SALES INTO NET INCOME.

Question 3

What is the formula for Profit Margin Ratio

Answer 3

PROFIT MARGIN RATIO = NET INCOME/NET SALES

Question 4

_______ is calculated by subtracting any returns or refunds from gross sales.

Answer 4

NET SALES

Question 5

It is the total revenues minus total expenses and is usually the last number reported on the income statement

Answer 5

NET INCOME

Question 6

TRUE OR FALSE. The profit margin ratio directly measures what percentage of sales is made up of (gross income)

Answer 6

FALSE. (NET INCOME)

Question 7

TRUE OR FALSE. The Profit margin ratio indirectly measures how well a company (spends) its expenses relative to its net sales

Answer 7

FALSE. (MANAGES)

Question 8

_______ analyses the ability of a company to pay off both its current liabilities as they become due as well as their long term liabilities as they become current

Answer 8

LIQUIDITY RATIOS

Question 9

It is a measure of how easy it will be for the company to raise enough cash or convert assets into cash

Answer 9

LIQUIDITY