Which of the Following Is the Correct Formula for the Profit

question 1

Multiple Choice

Which of the following is the correct formula for the profit margin ratio?

• A) Net profit / Sales
• B) Net sales / Average total assets
• C) Net profit × Capital invested
• D) Operating income / Net sales

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Definitions:

Average Total Cost

The total cost of production divided by the quantity of output produced; it includes both fixed and variable costs.

Economic Loss

This occurs when total costs exceed total revenue, leading to a negative profit situation.

Marginal Cost

The amount spent to produce an extra unit of a product or service.

Average Total Cost

The total cost divided by the quantity produced, representing the per-unit production cost.