Which of the following ratios is calculated by dividing net income by revenues?
A) Return on equity ratio
B) Net profit margin ratio
C) Current ratio
D) Fixed asset turnover ratio

Question

Quizplus · Accepted Answer

The net profit margin ratio is calculated by dividing net income by revenues, which represents the percentage of each dollar of revenue that is turned into profit. Option A, return on equity ratio, is calculated by dividing net income by shareholder's equity to measure the return earned on the shareholder's investment. Option C, current ratio, is calculated by dividing current assets by current liabilities to determine a company's ability to meet short-term obligations. Option D, fixed asset turnover ratio, is calculated by dividing revenues by fixed assets to measure a company's efficiency in using its fixed assets to generate sales.

Which of the Following Ratios Is Calculated by Dividing Net