If management wishes to evaluate the ability of a business to use sales to cover the operating expenses, they could use the:
A) rate of return on total assets.
B) rate of return on common stockholders' equity.
C) gross profit rate.
D) times interest earned.

Question

Quizplus · Accepted Answer

The gross profit rate, which is calculated by dividing gross profit by net sales, helps management evaluate how effectively a business is using its sales to cover its operating expenses, excluding interest and taxes. It measures the portion of sales revenue that exceeds the cost of goods sold, indicating the efficiency in managing production and pricing.

If Management Wishes to Evaluate the Ability of a Business