Question : _____________ratio establishes a relationship between gross profit and Revenue from Operations, i.e. Net Sales.
Option 1: Net profit ratio
Option 2: Operating profit ratio
Option 3: Gross profit ratio
Option 4: None of the above
Correct Answer: Gross profit ratio
Solution : Answer = Gross profit ratio. The gross profit Ratio Establishes the relationship between gross profit and revenue from the operation. The gross profit ratio evaluates the proportion of gross profit generated from revenue. It measures the efficiency of production and sales processes, indicating the percentage of revenue retained after deducting the cost of goods sold. Hence, the correct option is 3.
Question : ___________measures the relationship between Operating Profit and Revenue from Operations, i.e., Net Sales.
Option 1: Operating profit ratio
Option 2: Operating ratio
Option 3: Net profit ratio
Option 4: Gross profit ratio
Question : Which of the following statements are false with respect of Net profit ratio?
Option 1: Net Profit Ratio establishes the relationship between Net Profit and Revenue from Operations, i.e., Net Sales.
Option 2: Net Profit Ratio is an indicator of overall efficiency of the business. Higher the Net Profit Ratio, better the business.
Option 3: An increase in the ratio over the previous period shows improvement in the operational efficiency and decline means otherwise.
Option 4: None of the above.
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