Decision makers and analysts look deeply into profitability ratios to identify t
ID: 2335409 • Letter: D
Question
Decision makers and analysts look deeply into profitability ratios to identify trends in a company's profitability. Profitability ratios give insights into both the survivability of a company and the benefits that shareholders receive Identify which of the following statements are true about profitability ratios. Check all that apply. If a company has a profit margin of 10%, it means that the company earned a net income of $0.10 for each dollar of sales. An increase in a company's earnings means that the profit margin is increasing. If a company's operating margin increases but its profit margin decreases, it could mean that the company paid more in interest or taxes. If a company issues new common shares but its net income does not increase, return on common equity will increaseExplanation / Answer
Answer : Option (c) If a company's operating margin increases but its profit margin decreases, it could means that the company paid more in interest or taxes.
From the given Options to the question, Option ( C ) is apt. Because investors of the company look into the profitability ratios and make analysis that how far the company profit decisions was taken.