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9 Cards in this Set
- Front
- Back
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What is the gross profit ratio?
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gross profit / net sales x 100
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What is the net profit ratio?
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net profit / net sales x 100
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what is the return on owners equity ratio?
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net profit / average owners equity x 100
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Define the gross profit ratio.
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the gross profit ratio indicates the margin of gross profit available to cover expenses.
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Define the net profit ratio.
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the net profit ratio shows how much each dollar of sales represents net operating profit and indicates the margin of profitablilty of the firm.
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Define the return on owners equity ratio.
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the return on owners equity ratio indicates the rate of returns on owners equity invested in the business.
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Strategies to miprove the gross profit ratio.
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- An increase in sales eg. through a price increase or an advertising campaign.
- A decrease in the cost of good sold eg. through better buying or reducing theft or wastage. |
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Strategies to improve the net profit ratio.
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- Increase sales revenue eg. through price changes or sales turnovers through advertising.
- Decrease cost eg. through reducing staff. |
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Strategies to improve the returns on owners equity ratio.
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- invest elswhere more profitablilty.
- repaying capital to the owner if funds invested in the business are sitting idle. |
