Which of the following is a profitability ratio that measures the percentage of an organization's total sales or revenues that was net profit or income?
A) Interest coverage ratio
B) Net profit margin
C) Return on equity
D) Market value
E) Price-to-earnings ratio

Question

Quizplus · Accepted Answer

The net profit margin measures how much profit a company generates from its revenue. It is calculated by dividing the net income by total revenue and expressing the result as a percentage. The higher the net profit margin, the more efficient the company is at converting revenue into actual profit. Option A is incorrect as the interest coverage ratio measures a company's ability to pay off its interest expenses. Option C measures a company's profitability as a return on equity (shareholder investment). Option D and E are not profitability ratios but are related to company valuation.

Which of the Following Is a Profitability Ratio That Measures