Accounting - Financial Analysis Ratios

If the number of products sold increases -

The Gross Profit Ratio will...

• Increase

• Decrease

• Remain the same

If the number of products sold increases -

The Net Profit Ratio will...

• Increase

• Decrease

• Remain the same

If the number of products sold increases -

The Return on Owner's Equity will...

• Increase

• Decrease

• Remain the same

If the number of products sold decreases -

The Gross Profit will...

• Increase

• Decrease

• Remain the same

If the number of products sold decreases -

The Net Profit will...

• Increase

• Decrease

• Remain the same

A strategy to improve the Gross Profit Ratio is:

• Increase the selling price

• Decrease the selling price

• Increase the volume of sales

• Increase advertising

A strategy to improve the Gross Profit Ratio is:

• Find a cheaper supplier of inventory

• Decrease the selling price

• Increase the volume of sales

• Decrease spending on wages

A strategy to improve the Net Profit Ratio is:

(select more than one)

• Find a cheaper supplier of inventory

• Increase drawings

• Increase the volume of sales

• Decrease spending on wages

If the business finds a cheaper supplier of inventory - the following may happen...

(select more than one)

• Net Profit Ratio will increase

• Return on Owner's Equity will increases

• Gross Profit Ratio will increase

• Total Gross Profit will increase

If the business increases the number of products sold - the following may happen...

(select more than one)

• Net Profit Ratio will increase

• Total Cost of Goods Sold will increase

• Gross Profit Ratio will increase

• Total Gross Profit will increase