The Profit Margin Ratio Measures

question 43

Multiple Choice

The profit margin ratio measures:

• A) return to shareholders.
• B) the rate of return on total assets.
• C) the proportion of each sales dollar that represents profit.
• D) the difference between the purchase price and the selling price of inventory.

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Definitions:

Average Cost

The total cost of production divided by the quantity of the product produced, indicating the cost per unit of output.

Industry's Output

The total production of goods or services generated by all firms operating within a specific industry.

Decreasing-Cost Industry

An industry characterized by a downward-sloping long-run supply curve, indicating lowering costs as industry output increases.

Increasing-Cost Industry

An industry in which production costs increase as output expands, often due to scarce resources or rising input prices.