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kelso pharmacy generates 0.05 in net income for every $1 in sales. Which one fo the...

kelso pharmacy generates 0.05 in net income for every $1 in sales. Which one fo the following ratios would reflect this relationship? A) Receivable Turnover B) Profit Margin C) Return on assets D) Equity Multiplier E) Total Asset Turnover

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Answer #1

correct option is B, i.e., Profit Margin, The profit margin ratio formula can be calculated by dividing net income by net sales. Net sales is calculated by subtracting any returns or refunds from gross sales. Net income equals total revenues minus total expenses and is usually the last number reported on the income statement.

Receivables turnover ratio can be calculated by dividing the net value of credit sales during a given period by the average accounts receivable during the same period.

ROA is commonly defined as net income divided by total assets.

Equity multiplier shows the percentage of assets that are financed or owed by the shareholders.

The asset turnover ratio is an efficiency ratio that measures a company's ability to generate sales from its assets by comparing net sales with average total assets.

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