FREE Financial Management For Project Managers Financial Ratio Questions and Answers

Question 1

What contains the net profit ratio calculation formulas?

Accepted Answer

(Net Profit/Net sales)*100

Answer

The Net Profit Ratio is a key profitability metric that measures how much net profit a company generates for every dollar of net sales. It is calculated by dividing the Net Profit (profit after all expenses, including taxes) by Net Sales (total sales less returns and allowances) and then multiplying by 100 to express it as a percentage. This formula provides insight into a company's overall efficiency.

Question 2

How much of a contribution margin will bundle it have? The bundle's contribution margin is Rs. 40,000, while its income is Rs. 15,000

Accepted Answer

0.03

Answer

The question is ambiguously phrased, but if we interpret 'income' as net profit and assume the question is implicitly asking for the net profit margin (Net Profit / Sales), we can deduce the answer. If the net profit is Rs. 15,000 and the net profit margin is 0.03 (or 3%), this implies total sales of Rs. 500,000 (15,000 / 0.03). The bundle's contribution margin of Rs. 40,000 would then be additional information, potentially for other calculations not directly asked.

Question 3

Which ratio is regarded as a safe selvency margin?

Accepted Answer

Current ratio

Answer

The Current Ratio, calculated as Current Assets divided by Current Liabilities, is a primary liquidity ratio that assesses a company's ability to meet its short-term financial obligations. A healthy current ratio (typically above 1.0 or 2.0, depending on the industry) is generally considered a safe solvency margin, indicating that the company has sufficient liquid assets to cover its immediate debts.

Question 4

How much will the fross profit ratio be? If the sale price is set at a 25% premium to the cost

Accepted Answer

0.2

Answer

If the sale price is set at a 25% premium to the cost, it means Sale Price = Cost + 0.25 * Cost = 1.25 * Cost. Gross Profit is Sale Price - Cost, which equals 0.25 * Cost. The Gross Profit Ratio is calculated as (Gross Profit / Sale Price), so (0.25 * Cost) / (1.25 * Cost) simplifies to 0.25 / 1.25, which equals 0.2.

Question 5

What is determined when gross margin is proportional to revenues?

Accepted Answer

gross margin percentage

Answer

The gross margin percentage, also known as the gross profit margin, is a profitability ratio that expresses the gross margin as a proportion of a company's revenues (or net sales). It indicates the percentage of revenue remaining after deducting the cost of goods sold, reflecting the efficiency of a company's production and pricing strategies.

Financial Management for Project Managers Practice Test

Financial Management for Project Managers Practice Test

FREE Financial Management For Project Managers Financial Ratio Questions and Answers