Gross profit margin Correct Answer-shows how much is spent on producing the good or service that is sold for every dollar of sales revenue. (Profitability ratio)
Gross Profit Margin = Gross Profit/Sales
Operating Profit Margin Correct Answer-ompares the operating income of a company to its ne...
FMVA (CFI) Questions with correct answers
Gross profit margin Correct Answer-shows how much is spent on
producing the good or service that is sold for every dollar of sales
revenue. (Profitability ratio)
Gross Profit Margin = Gross Profit/Sales
Operating Profit Margin Correct Answer-ompares the operating income
of a company to its net sales. It is an indication of the efficiency of the
operation
Operating Profit Margin = EBIT/Sales
Net profit margin Correct Answer-shows how much is earned for every
dollar of sales revenue.
Net profit margin = Net income / Sales
Tax ratio Correct Answer-shows how well management manages tax.
(Efficiency ratio)
Tax ratio = Tax expense / Pre-tax income
Interest Coverage Ratio Correct Answer-shows how much income is
available to service debt costs. (Leverage ratio)
, Interest coverage ratio = EBIT(DA) / Interest expenses
Current Ratio Correct Answer-measures the ability of a company to
cover its obligations in the short term. (Liquidity ratio)
Current ratio = Current assets / Current liabilities
Quick ratio / acid test ratio Correct Answer-provides a more prudent
measure of short-term liquidity recognizing that the inventory cannot
always be readily converted into cash. (Liquidity ratio)
Quick ratio = (Current assets - Inventory) / Current liabilities
Asset turnover ratio Correct Answer-hows how effective the company is
in generating sales from its assets. (Efficiency ratio)
Asset turnover ratio = Sales / Total (or net) assets
Inventory turnover ratio Correct Answer-shows how quickly a company
sells its inventory. (Efficiency ratio)
Inventory turnover ratio = Cost of sales / Inventory
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