Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

14. Financial Statement Analysis

Ratios: Profit Margin

Financial Accounting

14. Financial Statement Analysis

Ratios: Profit Margin

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Multiple Choice

The net profit margin percentage is an example of which performance measure category?

Liquidity ratio

Solvency ratio

Efficiency ratio

Profitability ratio

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Verified step by step guidance

Understand the concept of net profit margin percentage: It measures how much net income is generated as a percentage of revenue, indicating the profitability of a company.

Review the definition of performance measure categories: Liquidity ratios assess short-term financial health, solvency ratios evaluate long-term debt-paying ability, efficiency ratios measure operational effectiveness, and profitability ratios assess the ability to generate profit.

Identify the category that aligns with net profit margin percentage: Since net profit margin directly evaluates the company's ability to generate profit relative to revenue, it falls under profitability ratios.

Compare net profit margin percentage with other categories: Liquidity, solvency, and efficiency ratios do not focus on profit generation but rather on financial stability and operational performance.

Conclude that net profit margin percentage is an example of a profitability ratio, as it directly measures the company's profit-generating capability.