The Profit Margin Ratio ________

question 138

Multiple Choice

The profit margin ratio ________.

• A) focuses on the liquidity of the business
• B) is computed by dividing net sales by net income
• C) shows how much gross profit a business earns on every $1.00 of sales
• D) is often compared to the industry average

Explain the concept and calculation of the internal rate of return (IRR).

Understand the reinvestment assumptions implicit in the NPV and IRR methods.

Identify incremental cash flows associated with capital budgeting projects.

Recognize the initial steps and investment requirements in the capital budgeting process.

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Definitions:

Drive Theory

A theory in psychology that posits that behavior is motivated by drives that arise from biological needs that demand satisfaction.

Homeostasis

The ability of a living organism to maintain internal stability by adjusting its physiological processes.

Drive-Reduction

A theory of motivation that posits that behavior is driven by the need to reduce internal states of tension caused by unmet biological needs.

Incentive

A factor that motivates or encourages someone to do something, often linked to rewards or punishments.