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Accounting Ratios and Profitability Analysis

Accounting Ratios and Profitability Analysis

Assessment

Flashcard

Business

12th Grade

Practice Problem

Hard

Created by

Sofía STRAZZOLINI

FREE Resource

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149 questions

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1.

FLASHCARD QUESTION

Front

What are profitability ratios used for?

Back

To assess how successful the management of a business has been at converting sales revenue into gross profit and net profit.

2.

FLASHCARD QUESTION

Front

How is Gross Profit Margin calculated?

Back

Gross profit margin (%) = (gross profit / sales revenue) x 100

3.

FLASHCARD QUESTION

Front

What is the formula for Gross Profit?

Back

Gross profit = revenue - cost of goods sold

4.

FLASHCARD QUESTION

Front

How is Net Profit Margin calculated?

Back

Net profit margin (%) = (net profit before interest and tax / sales revenue) x 100

5.

FLASHCARD QUESTION

Front

What does ROCE stand for?

Back

Return on Capital Employed

6.

FLASHCARD QUESTION

Front

What does ROCE measure?

Back

It assesses how efficiently an organization uses its capital or total assets to create goods and services that are turned into profit.

7.

FLASHCARD QUESTION

Front

What does a deteriorating Gross Profit Margin indicate?

Back

It implies that sales are not being transferred into trading profits.

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