Two frequently cited ratios of profitability that can be read directly from the common-size income statement are:
A) the gross profit margin and the net profit margin.
B) the gross profit margin and the earnings per share.
C) the gross profit margin and the return on total assets.
D) the earnings per share and the return on total assets.

Question

Quizplus · Accepted Answer

The gross profit margin and the net profit margin can be read directly from the common-size income statement, and are two frequently cited ratios of profitability. The gross profit margin is the percentage of revenue that remains after deducting the cost of goods sold, and the net profit margin is the percentage of revenue that remains after deducting all expenses, including taxes and interest.

Two Frequently Cited Ratios of Profitability That Can Be Read