Accounting · Profitability Ratios Analysis
Regarding Profitability Ratios, evaluate the following statements: Statement I: The Operating Ratio measures operating efficiency, and a lower numerical value is generally considered better as it indicates lower costs relative to sales. Statement II: The Net Profit Ratio is calculated by dividing Profit Before Interest and Taxes (PBIT) by Net Sales. Statement III: Return on Equity (ROE) measures profitability from the perspective of ordinary shareholders and is calculated as (Net Profit after Tax - Preference Dividend) divided by Average Equity Shareholder Funds. Which of the statements given above are correct?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1I, II and III
- 2Only II and III
- 3Only I and III✓
- 4Only I
Correct answer
Only I and III
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