The net profit margin ratio:
A) how much profit from each dollar of revenue.
B) means improved performance if it decreases.
C) means weaker performance if it increases.
D) measures the percentage of assets financed by debt.

Question

Quizplus · Accepted Answer

The net profit margin ratio indicates how much profit a company earns from each dollar of revenue. It is calculated by dividing net profit by total revenue. A higher net profit margin ratio is generally considered good as it means the company is efficient in controlling costs and generating profits. Therefore, choice B and C are incorrect. Choice D is also incorrect as the net profit margin ratio has nothing to do with measuring the percentage of assets financed by debt.

The Net Profit Margin Ratio