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    Question

    Ratio of net profit before interest and tax to sales is

    :
    A Gross profit ratio Correct Answer Incorrect Answer
    B Net profit ratio Correct Answer Incorrect Answer
    C Operating profit ratio Correct Answer Incorrect Answer
    D Interest coverage ratio. Correct Answer Incorrect Answer
    E Working capital ratio. Correct Answer Incorrect Answer

    Solution

    Answer: c. Operating profit ratio The ratio of net profit before interest and tax to sales is called the operating profit ratio. This ratio is used to determine the operating efficiency and profitability of a business. It indicates the percentage of sales that is available to cover the operating expenses and generate operating profit before considering the effects of financing and taxes. The formula for calculating the operating profit ratio is: Operating profit ratio = (Operating profit / Net sales) x 100

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