The profit margin ratio measures:
A) return to shareholders.
B) the rate of return on total assets.
C) the proportion of each sales dollar that represents profit.
D) the difference between the purchase price and the selling price of inventory.

Question

Quizplus · Accepted Answer

The profit margin ratio measures the proportion of each sales dollar that represents profit. It indicates how efficiently a company is managing its expenses and generating profits from its sales. Therefore, the correct answer is C. Choice A is incorrect because return to shareholders is measured by metrics like return on equity or dividend yield. Choice B is incorrect because the rate of return on total assets is measured by the return on assets (ROA) ratio. Choice D is incorrect because it describes the gross profit, not the profit margin ratio.

The Profit Margin Ratio Measures