Which of the following ratios are key components in measuring a company's operating efficiency? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.) A. Profit margin B. Equity ratio C. Return on total assets D. Total asset turnover

Question

Carelyn

Business

8 December, 07:47

Which of the following ratios are key components in measuring a company's operating efficiency? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.) A. Profit margin B. Equity ratio C. Return on total assets D. Total asset turnover

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Ty Kirk · Answer 1

A. Profit margin

D. Total asset turnover

Explanation:

Profit margin is a measure of a company's operating efficiency because it measures what percentage of sales revenue actually turns into profit after making all the corresponding deductions (operating expenses, interest expenses, tax expenses).

A high profit margin means that the company is efficient in obtaining profits from its main operating activity.

Total asset turnover is also a measure of a company's operating efficiency because it establishes the amount of sales revenue as a percentage of the company's total assets. In other words, it measures how good the company is in turning its assets into revenue.