Practice Profitability Ratios - 19.2.3 | 19. Financial Statement Analysis – Ratio Analysis | Management 1 (Organizational Behaviour/Finance & Accounting)
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19.2.3 - Profitability Ratios

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Learning

Practice Questions

Test your understanding with targeted questions related to the topic.

Question 1

Easy

What is the formula for the Gross Profit Ratio?

💡 Hint: Think about what cost is deducted from sales to find profit.

Question 2

Easy

What does ROE stand for?

💡 Hint: Consider whose equity we are examining in the context of earnings.

Practice 4 more questions and get performance evaluation

Interactive Quizzes

Engage in quick quizzes to reinforce what you've learned and check your comprehension.

Question 1

What does the Gross Profit Ratio measure?

  • Operational efficiency
  • Net sales performance
  • Profitability relative to equity

💡 Hint: Remember the focus on costs related to production.

Question 2

True or False: A high Net Profit Ratio always indicates a successful company.

  • True
  • False

💡 Hint: Consider what 'high' means in different contexts.

Solve 1 more question and get performance evaluation

Challenge Problems

Push your limits with challenges.

Question 1

A startup generated $1,200,000 in sales, spent $600,000 on goods, and $300,000 on expenses. Calculate the Gross Profit Ratio and the Net Profit Ratio. Discuss what these ratios reveal about the startup's financial performance.

💡 Hint: Keep the focus on how expenses affect net profitability and the balance between sales and costs.

Question 2

A tech corporation has a Net Income of $2,500,000 and Shareholders’ Equity of $10,000,000. Analyze its ROE compared to an industry average of 15%. What does this mean for investors?

💡 Hint: Think about investor confidence and what high ROE indicates in terms of value creation.

Challenge and get performance evaluation