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

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Definitions:

Stock Investments

Financial assets consisting of shares in companies, representing ownership and possibly entitling the shareholder to dividends.

Debt Investments

Financial assets involving the loan of money by an investor to a borrower, typically with the expectation of receiving interest income in addition to principle repayment.

Equity Method

An accounting technique used to record investments in other companies, where the investment is accounted for based on the investor’s share of the investee's equity.

Stock Investments

Financial assets consisting of stakes in companies through the purchase of common or preferred stock shares, with the expectation of earning dividends or capital gains.