Practice - Profitability Ratios
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Practice Questions
Test your understanding with targeted questions
What is the formula for the Gross Profit Ratio?
💡 Hint: Think about what cost is deducted from sales to find profit.
What does ROE stand for?
💡 Hint: Consider whose equity we are examining in the context of earnings.
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Interactive Quizzes
Quick quizzes to reinforce your learning
What does the Gross Profit Ratio measure?
💡 Hint: Remember the focus on costs related to production.
True or False: A high Net Profit Ratio always indicates a successful company.
💡 Hint: Consider what 'high' means in different contexts.
1 more question available
Challenge Problems
Push your limits with advanced challenges
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.
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.
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