Income Statement & Investor Ratios Quiz

Which ratio measures how well a company controls its production costs and pricing power?

• Return on Assets

• Gross Profit Margin

• Earnings Per Share

• Operating Profit Margin

The formula 'Net Income divided by Net Sales' is used to calculate which financial metric?

(a)  

Why do investors consider Operating Profit Margin to be a more 'realistic' measure of efficiency than Gross Profit Margin?

Which ratio specifically shows how efficiently a company uses its resources and assets to generate profit?

• Return on Equity (ROE)

• Earnings Per Share (EPS)

• Return on Assets (ROA)

• Gross Profit Margin

Return on Equity (ROE) is calculated by dividing Net Income by (a)   .

Which ratio is used to determine the amount of profit that belongs to each individual share of stock?

• Profit Margin

• Operating Income

• Weighted Average Shares

• Earnings Per Share (EPS)

According to the investor memory trick, 'Margins' represent profitability, while 'Returns' (like ROA and ROE) represent (a)   .

What might a falling profit margin indicate to a potential investor?

To calculate Earnings Per Share (EPS), what must be subtracted from Net Income before dividing by the weighted average shares outstanding?

• Operating Expenses

• Preferred Dividends

• Total Assets

• Gross Profit

Which ratio is considered one of the most important for shareholders because it shows the direct return they are getting on their investment?

• Gross Profit Margin

• Return on Assets

• Return on Equity

• Operating Profit Margin