The net profit margin is a profitability ratio that is calculated as ______.
A) net profit divided by average owners' equity
B) net profit divided by revenue or sales
C) gross profit divided by revenue or sales
D) long-term debt divided by owners' equity

Question

Quizplus · Accepted Answer

The net profit margin is calculated by dividing the net profit (revenue minus expenses) by revenue or sales. This ratio shows how much profit a company generates for each dollar of revenue earned. Choice A is the return on equity ratio, choice C is the gross profit margin ratio, and choice D is the debt-to-equity ratio.

The Net Profit Margin Is a Profitability Ratio That Is