The ratio of the net income before taxes to net sales is called ______. A. Current ratio B. Inventory turnover C. Profit margin ratio D. Price-earnings ratio

Current ratio
Inventory turnover
Profit margin ratio
Price-earnings ratio

The correct answer is C. Profit margin ratio.

The profit margin ratio is a measure of a company’s profitability. It is calculated by dividing the company’s net income by its net sales. The profit margin ratio tells you how much profit a company makes for every dollar of sales it generates.

A high profit margin ratio indicates that a company is efficient at generating profits. A low profit margin ratio indicates that a company is not efficient at generating profits.

The current ratio is a measure of a company’s liquidity. It is calculated by dividing the company’s current assets by its current liabilities. The current ratio tells you how easily a company can pay off its short-term debts.

An inventory turnover ratio is a measure of a company’s efficiency in managing its inventory. It is calculated by dividing the company’s cost of goods sold by its average inventory. The inventory turnover ratio tells you how many times a company sells its inventory

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each year.

A price-earnings ratio is a measure of a company’s valuation. It is calculated by dividing the company’s stock price by its earnings per share. The price-earnings ratio tells you how much investors are willing to pay for each dollar of a company’s earnings.

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