Most Financial Ratios Are Formed from Sets of Financial Statement

question 34

Multiple Choice

Most financial ratios are formed from sets of financial statement figures. Which of the following ratios are not?

• A)Cost ratio
• B)Current ratio
• C)P/E ratio
• D)Market/book ratio
• E)Both c and d

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Definitions:

Contribution to Overhead

The portion of sales revenue that exceeds direct costs, contributing towards covering the fixed costs of a business.

Direct Expenses

Direct expenses are costs that can be directly traced to a specific cost object, such as a product or department.

Contribution Margin

The amount by which sales revenue exceeds variable costs of production, indicating how much revenue contributes to fixed costs and profits.

Departmental Profit

The profit generated by a specific department within a company after direct costs and expenses related to the department are subtracted from its revenue.