IB Business Management MCQ QuizIB_Business_Management_3_5 Profit

Using the table below, calculate the firm with the highest gross profit margin (GPM). Company A ($millions) Company B ($millions) Company C ($millions) Company D ($millions) Gross profit 15 19 13 21 Capital employed 87 95 43 58 Sales revenue 25 31 27 34

• Company A

• Company B

• Company C

• Company D

Using the table below, calculate the firm with the highest gross profit margin (GPM). Company E ($millions) Company F ($millions) Company G ($millions) Company H ($millions) Revenue 29 33 18 42 Cost of sales 17 14 12 24 Expenses 21 9 5 4

• Company E

• Company F

• Company G

• Company H

Identify the term that best describes the purpose of the gross profit margin (GPM).

• The ability of a firm to generate profit by using internal sources of finance

• The ability of a firm to generate profit from selling its products

• The ability of a firm to generate profit from using external sources of finance

• The ability of a firm to manage its cash flow and liquidity position

Identify which of the following strategies would not help to improve a firm’s gross profit margin (GPM).

• Cutting the number of direct staff employed in the manufacturing process

• Optimizing the marketing mix for the products sold by the firm

• Reducing fixed and indirect costs

• Using suppliers that can offer cheaper raw materials

Identify the term that best describes the purpose of the profit margin.

• The ability of a firm to generate profit from selling its products

• The ability of a firm to generate profit from using all its sources of finance

• The ability of a firm to generate profit overall as a whole business entity

• The ability of a firm to manage its cash flow and liquidity position

Identify the strategy that will not help a firm to improve its profit margin.

• Improving quality by using more expensive materials and components

• Increasing the price to increase sales revenue

• Reducing fixed costs such as rental expenses

• Reducing indirect costs such as insurance expenses

Using the table below, calculate which firm has the highest profit margin. Company W ($millions) Company X ($millions) Company Y ($millions) Company Z ($millions) Gross profit 7 12 14 23 Total expenses 3 7 12 27 Cash 4.5 3.1 2.6 7.7 Revenue 10 15 21 35

• Company W

• Company X

• Company Y

• Company Z

Using the table below, calculate the profit margin. Note that not all of the information is required for the calculation. ($millions) Advertising expense 4 Capital expenditure 1 Cost of sales 13 Interest expenses 2.5 Rent expense 4 Salaries and wages 9 Sales revenue 38 Working capital 7

• -8.50%

• -7.11%

• 13.95%

• 21.05%

Return on capital employed (ROCE) is a(n) ____________ ratio.

• Efficiency

• Gearing

• Liquidity

• Profitability

Using the table below, calculate the return on capital employed (ROCE). Gross profit $3,575,000 Profit before interest and tax $725,550 Profit after interest and tax $602,603 Cash $2,895,000 Loan capital $6,500,000 Share capital $8,250,125 Retained earnings $1,275,850

• 3.18%

• 3.83%

• 4.53%

• 5.76%