Which of the following is a correct interpretation of a proﬁt margin of 0.20?
A) For each $1 of sales the ﬁrm earns twenty cents in net income.
B) For each $1 of sales the ﬁrm earns twenty cents before operating expenses.
C) For each $1 of sales, $2 fall to the bottom line.
D) It takes sales of $1 to generate $20 in net proﬁt after taxes.
E) It takes twenty cents in sales to generate $1 in proﬁt.

Question

Quizplus · Accepted Answer

A profit margin of 0.20 means that for each dollar of sales, the firm earns twenty cents in net income.

Which of the Following Is a Correct Interpretation of a Proﬁt