Profitability analysis quiz

What is Revenue?

• is the total amount of income generated by the sale of goods or services

• is the difference between aggregate income and total costs and assessment of the financial condition of the enterprise

• is the system of indicators of financial results

• it the amount of money a business loses every month

The best definition of Profit is:

• is the income generated from normal business operations and includes discounts and deductions for returned merchandise

• the total amount of money a business spends

• the money a business pulls in after accounting for all expenses

• is the interest cost that a firm would have to pay for borrowed capital

Product profitability analysis is

• a creative way of looking at causes of problems because it helps stimulate thinking and organize thoughts

• the amount of profit that a particular product or service makes in a partiular period

• a class of financial metrics that are used to assess a business's ability to generate earnings relative to its revenue, operating costs, balance sheet assets

• gross profit, which is sales minus the cost of goods sold

Choose the correct denition of Gross Profit:

• is the income left over after all expenses, including taxes and interest, have been paid

• is the income generated from normal business operations

• is total sales minus the cost of goods sold

• is equal to how much net income or profit is generated as a percentage of revenue

Revenue =$200,000 Costs of sales =$150,000 Operating expenses (other expenses, taxes) =$ 20,000.

What is the Net profit?

• $ 50,000

• $ 30,000

• $ 130,000

• $ 170,000

Revenue = $100,000. Cost of sales =60,000. Operating (other) expenses = $ 10,000.

What is the Gross profit margin ?

• $ 30,000

• 30 %

• 40 %

• 10 %

What is the Return on Capital Employed formula ?

• (Net income - Dividends) / (Debt + Equity)

• Net income / Equity capital

• Earnings before interest and tax / (Total assets − Current liabilities)

• Earnings before interest and tax / Total assets

You are a house flipper. You purchased a house for $80,000 and spent $30,000 in renovations.

You sale renovated house for $150,000.

What is Return on investment (ROI) ?

• $ 40, 000

• 27 %

• 20 %

• 54 %

Net sales = $ 100,000. Earnings before income and taxes (EBIT) = $ 20,000. Net profit = $ 10,000.

What is Return on sales ratio ?

• $ 80,000

• $ 70,000

• 20 %

• 10%

• 30 %

Why might the Gross profit margin increase ?

• Cost of sales have decreased

• Cost of sales have increased

• Operating (other) expenses have increased

• Operating (other) expenses have decreased