Which of the following best describes the profit margin ratio?
A)It is a measure of the risk and liquidity of the entity.
B)It measures how much revenue is available after paying for the cost of goods sold to meet other expenses.
C)It is a measure of the effectiveness of the entity at controlling costs.
D)It is a measure of the amount of dividends to be paid to the shareholders.

Question

Quizplus · Accepted Answer

The profit margin ratio measures how effectively a company controls its costs relative to its revenue, indicating the percentage of revenue that turns into profit after all expenses are deducted.

Which of the Following Best Describes the Profit Margin Ratio