What does the gross profit margin describe?
Gross profit earned per dollar of revenue
Costs incurred per dollar of products sold
Gross profit earned per dollar of capital employed
Gross profit earned per dollar of net profit earned
Which of the following actions would not help in raising a firm's gross profit margin?
Optimising the marketing mix
Using cheaper raw material suppliers
Reducing fixed and indirect costs
Cutting the number of staff employed in the manufacturing process
Which of the following actions would not help in raising a firm's net profit margin?
Reducing fixed costs such as rental expenses
Reducing indirect costs such as insurance expenses
Boosting gross profit margins
All of the above
What formula is used to calculate ROCE?
Total dividends / capital employed x 100%
Net profit after interest and tax / total share capital x 100%
Net profit before interest and tax / capital employed x 100%
Gross profit / net profit after interest and tax x 100%
Which of the following cannot be analysed with a profitability ratio?
Historical comparisons of a business in two different time periods
A firm’s financial performance compared with its competitors
The return on financial investments made
The amount of cash spent by the business
Which of the following would not improve the gross profit margin (GPM) of a business that operates in a highly competitive market?
Introducing new products with a higher gross profit margin
Adopting aggressive promotional strategies that persuade more customers to buy its products
Raising the price of products sold in highly competitive markets
Falling raw material prices that result in lower cost of goods sold
Which of the following statements best describes the net profit margin (NPM)?
It shows what proportion of profits are being distributed to shareholders
It shows how well a company is controlling its costs, including expenses
It show how efficiently a company is turning profits into cash
It shows what return is being made on assets employed in the business
If sales revenue equals $10 million, cost of goods sold equal $6 million and expenses equals $3 million, what is the gross profit margin?
40%
20%
35%
10%
If sales revenue equals $10 million, cost of goods sold equal $6 million and expenses equals $3 million, what is the net profit margin?
10%
40%
20%
35%