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WorksheetsProfitability Ratios
Total questions: 23
Worksheet time: 11mins
Profitability ratios are important to who?
Customer
Owner
Board members
A company has a high net profit ratio, what alterations can be made to improve the ratio?
Increase sales revenue
Increase expenses
Increase stock
What ratio shows if a company has weak control over the expenses in proportion to sales?
Return on equity ratio
Ratio of expense to sales
Net profit ratio
Which ratio shows if the company can cover all of its selling, administrative and financial costs?
Gross Profit Ratio
Net Profit Ratio
Owner's Equity Ratio
What ratio indicates how effective the return on the enterprise's investment in its asset?
Return on total assets ratio
Return on equity ratio
Ratios of expenses to sales
To calculate the return on equity, net profit is divided by what?
Average total assets
Net sales
Average owner's equity
A company has a high return on equity, what does this indicate?
Staff need to do a better job
Management are working efficiently
Owner should invest elsewhere
A company has a low return on total asset, what does this indicate?
Poor performance of assets
Poor performance of staff
Poor performance by management
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%
Revenue = £100,000
Cost of sales = £50,000
Other expenses = £25,000
What is the gross profit?
£25,000
£50,000
£100,000
£75,000
Revenue = £100,000
Cost of sales = £50,000
Other expenses = £40,000
What is the gross profit margin?
35%
50%
10%
85%
Net profit = £100,000
Cost of sales = £50,000
Total sales revenue = £300,000
What is the operating profit margin?
20%
33.3%
66.6%
16.7%
What does the operating profit margin tell us?
How many staff are employed
What type of ownership the business has
How efficiently a business is run
The cash inflows and outflows
Calculate the net profit ratio if profit = $40,000 and revenue = $100,000
15%
30%
40%
$40
