34 QUESTION 34Profit margin is equal toA) net income divided by total assetsB) net income divided by total owners' equityC) net income divided by salesD) None of theseO AOD

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Profit margin is equal to ,

Financial & Managerial Accounting

13th Edition

ISBN:9781285866307

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter26: Cost Allocation And Activity-Based Costing

Section: Chapter Questions

Problem 7DQ

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Concept explainers

Market Efficiency

Market efficiency refers to the market's ability to provide investors with all available information about investment options for buying and selling securities. Market efficiency reflects the true value of securities without undervaluing or overvaluing them. When the quality and quantity of information increase, the market becomes more efficient, allowing it to reduce arbitrage and obtain higher market returns from investment. In a well-functioning market, everyone receives all information completely and immediately at no cost. It opens up a plethora of opportunities for investors to access various investment options.

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Expert Solution

Step 1

Net profit is the profit generated after deducting all operating and non-operating costs from the revenues generated. When it is expressed as a percentage of sales, it is known as Net Profit Margin.

It is calculated as:

$P r o f i t M a r g i n = \frac{N e t P r o f i t}{S a l e s}$

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