Chapter 25: Analysis of Accounts

Gross Profit Refers to

• money remaining after all expenses are paid
• money remaining after taxes have been paid
• Sales less cost of goods sold
• None of the above

Net Profit or Net Loss refers to

• Gross Profit + Sales Revenue
• The sum of assets and liabilities
• Gross Profit - expenses
• None of the above

What is the Gross Profit Margin for this business?

• 20%
• 30%
• 25%
• 40%

What is the Net Profit Ratio for this business?

• 17%
• 30%
• 22%
• 18%

What is the Return on Capital Employed for this business?

• 10%
• 10.5%
• 11%
• 18%

How can a business improve the Gross Profit Margin?

• Finding a cheaper supplier
• Lowering wages
• Lowering the cost of electricity
• All of the above are correct

How can a business improve the Net Profit Margin?

• Finding a more expensive supplier with better quality
• Reducing the wage bill
• Raising electricity usage
• None of the above

Financial ratios are used in comparison of other like businesses?

• True
• False

It is better to have a lower NP than the industry average?

• True
• False

The Return on Capital Employed is considered to be good if...

• the return is greater than the sum total of Net Assets
• the return is less than the bank interest rate
• the return is equal to the bank interest rate
• the return is greater than the bank interest rate