Which of the Following Is a Correct Interpretation of a Profit

question 224

Multiple Choice

Which of the following is a correct interpretation of a profit margin of 0.20?

• A) For each $1 of sales the firm earns twenty cents in net income.
• B) For each $1 of sales the firm earns twenty cents before operating expenses.
• C) For each $1 of sales, $2 fall to the bottom line.
• D) It takes sales of $1 to generate $20 in net profit after taxes.
• E) It takes twenty cents in sales to generate $1 in profit.

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Definitions:

Total Liabilities

The sum of all financial obligations or debts a company owes to external parties.

Capital

Financial resources or assets owned by a business, used to fund its operations and growth.

Meta-contrast Principle

A social psychology concept suggesting that individuals define in-groups and out-groups based on the most distinct features that differentiate them from each other.

Group Norms

Shared expectations and rules that guide behavior of members within a group, influencing conformity and group dynamics.