Profit Margin
Return on Assets
Asset Turnover
Return on Equity
100
What does the profit margin ratio show?
The profit margin ratio shows the company's ability to generate profit from its sales.
100
How is the Return of Assets ratio expressed?
As a percentage with one decimal place.
100
What does the Asset Turnover ratio measure?
The asset turnover ratio measures how efficiently assets are used to generate revenue.
100
What does the Return on Equity ratio measures?
The return on equity ratio measures how much profit a company generates with the money shareholders have invested.
200
What is the formula for Profit Margin?
Profit Margin = Net Income / Net Sales
200
What is the formula for Return on Assets?
Return on Assets = Net Income / Average Total Assets
200
What is the formula for Asset Turnover?
Asset Turnover = Net Sales / Average Total Assets
200
What is the formula for Return on Equity?
Return on Equity = Net Income / Average Shareholders' Equity
300
What can the Profit Margin be compared to?
The profit margin can be compared to both previous periods and industry standards.
300
What can the Return on Assets be compared to?
Return on assets can be compared to previous periods or industry norms.
300
How is the turnover ratio expressed as?
The turnover ratio is expressed in times per year, e.g., 2.3 times.
300
What can the Return on Equity be compared to?
Return on equity should be compared to previous periods or industry norms.
400
When a profit margin is lower than the comparison percentage, what does a company look to see?
When a profit margin is lower than the comparison percentage, a company might look to see if selling prices are high enough or if its costs are too high.
400
When does it make sense to expand, according to the Return of Assets?
If the return on assets is expected to be higher than the finance rate charged to purchase those assets, then it makes sense to expand.
400
What can Asset Turnover be compared to?
Asset turnover can be compared to previous periods or industry norms.
400
If a company can borrow funds at an interest rate that is lower than its return on equity, then it would be________________________________.
If a company can borrow funds at an interest rate that is lower than its return on equity, then it would be favourable to do so to increase its earnings
500
The higher the profit margin, the greater the company's_____________________________________
The higher the profit margin, the greater the company's ability to ride out increases in operating expenses or future periods of low sales caused by price wars.
500
What does the return on assets ratio measure?
The return on assets ratio measures the company's ability to use its assets to generate income.
500
Why does retail companies tend to have high asset turnover ratios?
Because of competitive or low pricing strategies.
500
When trying to attract investors, a company could point to______________________________________.
When trying to attract investors, a company could point to the comparison between borrowing rates and the return on equity.
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