Asked by Janelle Lightbourne on Jun 28, 2024
Verified
Which of the following statements regarding the net profit margin ratio is false?
A) The numerator is net income.
B) The denominator is net sales or operating revenues.
C) It measures how much of every sales dollar is gross profit.
D) Financial analysts expect well-run businesses to maintain or improve their profit margin over time.
Net Profit Margin Ratio
A profitability metric that shows the percentage of revenue that remains as net income after all expenses have been deducted.
Net Income
The total earnings of a company after accounting for all expenses and taxes, reflecting the company's profitability.
Operating Revenues
Income generated from the core business activities of a company.
- Acquire knowledge on the basics of revenue recognition and expense reporting.
Verified Answer
ZK
Zybrea KnightJul 05, 2024
Final Answer :
C
Explanation :
The net profit margin ratio measures the percentage of each dollar of sales that results in net income after all expenses are paid. Therefore, statement C is false as it states that it measures how much of every sales dollar is gross profit, which is not correct.
Learning Objectives
- Acquire knowledge on the basics of revenue recognition and expense reporting.