Ratio Analysis

Question 1

Operating expenses to sales ratio (Profitability)

Answer 1

Indicates whether cost cutting is necessary

Question 2

Gross profit ratio (profitability)

Answer 2

Average margin between selling price and inventory cost.

Too high may result in lost sales.

Question 3

Credit risk ratio

Answer 3

Measure of the risk that customers may not pay their accounts

• the lower, the better