Finance

• when interpreting profitability ratios, a company should ideally compare its ratios to: The average profitability ratios for company's in the same industry
• profitability ratios primarily asses a company's profitability overall performance
• measures the percentage of operating income to sales: operating profit margin ratio
• generally a higher net profit margin ratio is considered: more favorable for the company's profitability
• it shows how many pesos of gross profit is earned for every peso of: gross profit margin ratio
• when interpreting profitability ratios its generally not advisable to: focus solely on the current year's data
• when analyzing ROA, a lower ratio might suggest: The company is struggling to generate profit from its assets
• it measures the amount of net income earned in relation to stockholder's equity: return in equity
• A company with consistently high gross profit margin ratio might be: selling its products at a premium price point.
• operating expenses are directly deducted from the cost of good sold to arrive at the gross profit: False
• return on assets ROA and return on equity ROE essentially measure the same concept: FALSE
• A company with a high gross profit margin ratio necessarily has a high net profit margin ratio: False
• A company with a low operating margin ratio likely has: High operating expenses
• assesses the ability of company effectively use it assets to generate assets: Return on Assets (ROA)
• Profitability ratios are the only useful for evaluating a company's historical financial performance: False