Profitability Ratios Level 1 Quiz Financial Analysis Quiz On Jan 26, 2026 Share Profitability Ratios Level 1 30 questions in 10 minutes Pass Score 70% 1 / 30 Return on capital employed (ROCE) measures the profit generated from all capital used in the business. False True ROCE evaluates the return generated from the total capital employed 2 / 30 Return on assets (ROA) measures how effectively a company uses its assets to generate profit. True False ROA evaluates the efficiency of asset usage in generating profit 3 / 30 The operating profit margin excludes non-operational income and expenses. False True It focuses on profits from core business activities 4 / 30 Return on equity (ROE) can be influenced by the company’s level of debt. False True Higher debt can increase ROE, but also adds risk 5 / 30 A higher gross profit margin generally indicates better cost control. False True It shows a higher proportion of revenue remaining after the cost of goods sold 6 / 30 The net profit margin ratio shows the percentage of profit earned from each dollar of sales. False True The net profit margin ratio measures the percentage of net profit relative to sales revenue 7 / 30 Return on assets (ROA) is affected by both the company's profits and its asset base. True False ROA is influenced by net income and total assets 8 / 30 Return on equity (ROE) is calculated by dividing net income by total equity. False True ROE measures the return generated on shareholders' equity 9 / 30 A declining return on equity (ROE) suggests decreasing profitability or increased equity. False True Lower ROE can be due to reduced profits or higher equity 10 / 30 Profitability ratios do not consider external factors like economic conditions. True False They focus on internal financial performance 11 / 30 Profitability ratios are used to assess a company’s short-term liquidity position. True False Profitability ratios evaluate long-term profitability, not short-term liquidity 12 / 30 The operating profit margin ratio is calculated by dividing operating profit by sales revenue. True False This ratio assesses the profitability from core business operations 13 / 30 Profitability ratios are typically used to analyze a company’s solvency. True False Solvency is assessed using different ratios such as debt-to-equity, not profitability ratios 14 / 30 The operating profit margin includes all operating and non-operating income. True False It includes only operating income and expenses 15 / 30 Profitability ratios include the current ratio and quick ratio. True False The current ratio and quick ratio are liquidity ratios, not profitability ratios. 16 / 30 Profitability ratios can help identify trends in a company's financial performance over time. True False They are useful for analyzing performance trends. 17 / 30 Profitability ratios are only relevant for publicly traded companies. True False They are useful for both public and private companies 18 / 30 Profitability ratios can vary significantly between companies in the same industry. True False Differences in business models and operational efficiency affect profitability 19 / 30 The net profit margin ratio is affected by income taxes and interest expenses. False True It reflects net profit after all expenses, including taxes and interest 20 / 30 Profitability ratios are a key indicator of a company’s financial health. True False They provide insights into how well a company generates profit 21 / 30 A company with a high return on assets (ROA) is less likely to have inefficient asset management. True False High ROA indicates effective asset use 22 / 30 Profitability ratios are best used to assess a company’s cash flow. False True Cash flow is assessed using cash flow statements, not profitability ratios. 23 / 30 A higher return on investment (ROI) indicates a more profitable investment. False True ROI measures the efficiency of an investment in generating profit. 24 / 30 A higher return on capital employed (ROCE) indicates more efficient use of capital. False True ROCE measures how well capital is used to generate profits 25 / 30 The price-to-earnings (P/E) ratio is a measure of a company’s profitability. False True the P/E ratio measures stock valuation relative to earnings, not profitability directly 26 / 30 Gross profit margin is a type of profitability ratio that indicates the percentage of revenue that exceeds the cost of goods sold. False True The gross profit margin shows how much of each dollar of revenue is gross profit. 27 / 30 Profitability ratios measure a company's ability to generate profit relative to its revenue or assets. True False Profitability ratios assess a business's ability to earn a profit relative to revenue, total assets, or invested capital. 28 / 30 Profitability ratios are not useful for comparing companies in different industries. False True Industry-specific factors make direct comparisons less meaningful 29 / 30 A company with a low gross profit margin might be struggling with high production costs. False True A low gross profit margin indicates high costs relative to sales 30 / 30 Profitability ratios can help assess management effectiveness. False True These ratios are useful for evaluating how well management generates profit Your score is LinkedIn Facebook Twitter VKontakte 0% Send feedback profitability ratiosprofitability ratios are used to:profitability ratios blank______.
