Which of the following ratios measure the adequacy of profits?
I. Profit compared to sales
II. Profit compared to equity
III. Profit compared to total assets
IV. Profit before interest and finance costs/ finance costs
A) II and IV
B) I and II only
C) I, III and IV
D) I, II and III only

Question

Quizplus · Accepted Answer

Profit compared to sales, equity, and total assets (I, II, and III) are ratios that measure the adequacy of profits by assessing profitability in relation to sales, equity, and assets. Option IV is a coverage ratio, not a profitability adequacy measure.

Which of the Following Ratios Measure the Adequacy of Profits