The profit margin ratio for ROCE indicates
A)the sales generated from each dollar of assets.
B)the portion of the sales dollar left over for the common shareholders after covering all operating costs and subtracting claims of creditors and preferred shareholders.
C)the portion of the sales dollar left over for the preferred shareholders after covering all operating costs and subtracting claims of creditors and common shareholders.
D)the proportion of total assets, or total financing, provided by common shareholders contrasted with the financing provided by creditors and preferred shareholders.
E)the proportion of total assets, or total financing, provided by preferred shareholders contrasted with the financing provided by creditors and common shareholders.

Question

Quizplus · Accepted Answer

The profit margin ratio measures the portion of sales that is left after all operating costs and claims of creditors and preferred shareholders have been subtracted. In other words, it calculates the profitability of a company's sales. Therefore, option B is the correct answer. Option A is related to asset turnover ratio, option D is related to the capital structure of the company, and option E is not a relevant answer.

The Profit Margin Ratio for ROCE Indicates