Which Ratio Computes the Amount of Net Income Generated Per

question 72

Multiple Choice

Which ratio computes the amount of net income generated per each $1 of sales?

• A)EV multiple
• B)Gross margin
• C)Return on equity
• D)Profit margin
• E)PE ratio

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Definitions:

Rational

Describes a decision maker who chooses the available option that leads to the outcome he or she most prefers.

Diminishing Marginal Utility

The principle stating that as a person consumes more units of a good, the satisfaction (utility) gained from consuming each additional unit decreases.

Giffin Good

A type of good for which demand increases as the price increases, contradicting the basic law of demand due to the income effect.

Income Effect

The relationship between changing income levels in an economy or for individuals and the subsequent effect on goods and services demand.