Which Measure Would Be Most Useful in Comparing the Operating

question 33

Multiple Choice

Which measure would be most useful in comparing the operating profitability of two firms in different industries?

• A)Net profit margin
• B)Return on equity
• C)Sales to total assets
• D)Return on assets

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Definitions:

Machine-Hours

A measure of production output or capacity, indicating the total hours that machinery is operated over a specific period.

Fixed Overhead

Regular, unchanged costs incurred by a business for its operations regardless of varying levels of production, such as rent, salaries, and insurance.

Unused Capacity

The available resources or production capabilities that are not currently being utilized.

Activity-Based Costing

A method of costing that apportions indirect expenses and overhead to specific operations, enhancing the accuracy of product cost calculations.