[amp_mcq option1=”Stock Turnover Ratio” option2=”Net Profit Ratio” option3=”Gross Profit Ratio” option4=”Operating Ratio” correct=”option1″]
The correct answer is: A. Stock Turnover Ratio
A stock turnover ratio is a measure of how efficiently a company manages its inventory. It is calculated by dividing the cost of goods sold by the average inventory. A higher stock turnover ratio indicates that a company is selling its inventory more quickly, which can be a sign of good management. However, a very high stock turnover ratio can also indicate that a company is not holding enough inventory to meet customer demand.
The other options are all measures of profitability, and a higher ratio for these measures generally indicates better performance.
- Net profit ratio is a measure of how much profit a company makes after accounting for all expenses. It is calculated by dividing net income by net sales. A higher net profit ratio indicates that a company is more profitable.
- Gross profit ratio is a measure of how much profit a company makes from its sales before accounting for expenses other than the cost of goods sold. It is calculated by dividing gross profit by net sales. A higher gross profit ratio indicates that a company is more profitable.
- Operating ratio is a measure of how much a company spends on operating expenses relative to its sales. It is calculated by dividing operating expenses by net sales. A lower operating ratio indicates that a company is more efficient in its use of resources.