Profitability Ratios

Identify the correct forumla for the net profit ratio.

• Profit/Revenue x 100

• Revenue/Profit x 100

• Profit/Capital x 100

• Revenue/Owner's Equity x 100

Calculate the net profit ratio if profit = $40,000 and revenue = $100,000

• 15%

• 30%

• 40%

• $40

Calculate the net profit ratio if revenue = $200,000 and expenses = $150,000

• 20%

• 25%

• 50%

• 75%

Identify the correct meaning of a net profit ratio of 15%: "This means for every $1...

• ...of profit, revenue generated is $0.15"

• ...of revenue, profit generated is $15"

• ...of equity, the return for the owner is $0.15"

• ...of revenue, profit generated is $0.15"

When calculating the return on owner's equity, an average of the capital must be calculated. Calculate the average capital given the following information: Capital @ 1 July 2019 = $50,000 and Capital @ 30 June 2020 = $90,000

• $50,000

• $60,000

• $70,000

• $140,000

Identify the correct working for calculating the average owner's equity using the information shown.

• ($25000 + $32500)/2

• $32,500/2

• ($25,000 + $10,000)/2

• ($25,000+$35,000+$32,500)/3

Calculate the return on owner's equity if profit = $50,000 and the average owner's equity = $200,000

• 20%

• 25%

• 50%

• 150%

Identify the correct return on owner's equity ratio, if the meaning was: "For every $1 of owner's equity, $0.34 is the return for the owner."

• 0.34%

• 3.4%

• 34%

• 340%

Calculate the net profit ratio given the information shown.

• 39%

• 61%

• 65%

• 88%

Approximate the return on owner's equity given the information shown.

• 10%

• 30%

• 60%

• 90%