Profit margin is defined as:
A) Net income divided by assets.
B) Net sales divided by assets.
C) Net income divided by net sales.
D) Net sales divided by net income.
E) Revenues divided by net sales.

Question

Quizplus · Accepted Answer

Profit margin is the ratio of net income to net sales. It measures how much profit a company earns for each dollar of revenue generated. Option A and B are not correct as they do not take into account the profitability of the company. Option D is also incorrect as dividing net sales by net income does not provide a meaningful ratio. Option E is not correct as it is not a commonly used formula for calculating profit margin.

Profit Margin Is Defined As