Which one of the following ratios is a common analytical tool used by merchandise corporations, but not by service corporations?
A) Earnings per share
B) Gross profit ratio
C) Current ratio
D) Profit margin

Question

Quizplus · Accepted Answer

The ratio that is a common analytical tool used by merchandise corporations, but not by service corporations is the Gross profit ratio. This ratio indicates how much profit a company makes after deducting the cost of goods sold. As merchandise corporations sell physical products, they have a cost of goods sold, which makes this ratio relevant to them. Service corporations typically do not have a cost of goods sold, meaning this ratio is not as relevant to their operations.

Which One of the Following Ratios Is a Common Analytical