Decision makers and analysts look deeply into profitability ratios to identify t

Question

Decision makers and analysts look deeply into profitability ratios to identify trends in a company's profitability. Profitability ratios give insights into both the survivability of a company and the benefits that shareholders receive Identify which of the following statements are true about profitability ratios. Check all that apply. If a company has a profit margin of 10%, it means that the company earned a net income of $0.10 for each dollar of sales. An increase in a company's earnings means that the profit margin is increasing. If a company's operating margin increases but its profit margin decreases, it could mean that the company paid more in interest or taxes. If a company issues new common shares but its net income does not increase, return on common equity will increase

Explanation / Answer

Answer : Option (c) If a company's operating margin increases but its profit margin decreases, it could means that the company paid more in interest or taxes.

From the given Options to the question, Option ( C ) is apt. Because investors of the company look into the profitability ratios and make analysis that how far the company profit decisions was taken.

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