Net income divided by sales is the formula for which of these analytical measures?
A) Return on assets
B) Return on equity
C) Earnings per share
D) Net margin

Question

Quizplus · Accepted Answer

Net margin, also known as the profit margin, is calculated by dividing net income by sales. This measure shows the percentage of sales that are turned into profits. Option A (Return on assets) is calculated by dividing net income by total assets and shows how efficiently a company uses its assets to generate profits. Option B (Return on equity) is calculated by dividing net income by shareholder's equity and shows how much return a company is generating for its shareholders. Option C (Earnings per share) is calculated by dividing net income by the number of outstanding shares and shows how much profit is available per share of stock.

Net Income Divided by Sales Is the Formula for Which