Profitability Ratios Flashcards
1
Q
Gross Margin
A
Gross Profit/Net SalesGross margin is the sales remaining after covering cost of goods sold
2
Q
Contribution Margin
A
Contribution Margin/Net SalesContribution margin remaining on sales after all variable costs are covered
3
Q
Profit Margin
A
Net Income/Net SalesMeasures net income generated from each dollar of sales
4
Q
Return on Assets
A
Net Income/Average Total AssetsMeasures how much profit is generated by the company’s assets
5
Q
Return on Stockholders’ Equity
A
Net Income/Average Stockholders’ EquityMeasures the profitability of stockholders’ investment
6
Q
Asset Turnover
A
Net Sales/avg assetsMeasures how efficiently the company used its assets to generate sales
