Which of the following pairs of ratios measure the profitability of a company?
A)Inventory Turnover and Asset turnover
B)Dividend Payout and Return on Sales
C)Gross margin and Asset Turnover
D)Price-Earnings ratio and Accounts Receivable Turnover

Question

Quizplus · Accepted Answer

Gross margin measures the percentage of revenue left after deducting the cost of goods sold, which indicates the profitability of the company. Asset turnover measures how efficiently a company is using its assets to generate revenue, which also reflects profitability. Therefore, the pair of ratios that measure the profitability of a company is Gross margin and Asset turnover. The other options do not directly measure profitability.

Which of the Following Pairs of Ratios Measure the Profitability