3. Which of the following has Net profit as basis for calculation
Answers
Answer:
Net profit is taken as basis for calculation of some of profitability ratios.
Explanation:
1) Profitability ratios are required for analysis from owners point of view: Earnings per share = Net profit÷ No. of shares outstanding
2) Profitability on return on Assets (ROA): Return on assets= Net profit ÷ Average fixed assets × 100
3) Profitability based on sales of firm : Net profit ratio=Net profit ÷ Sales ×100
Answer:
Explanation:
Question:
Which of the following has Net profit as basis for calculation
a) Net present value
b) Average rate of return
c) Internal rate of return
d) Payback period
Explanation:
Net Profit:
The amount of money your company makes after deducting all operational, interest, and tax charges during a specific period of time is known as net profit. You'll need to know a company's gross profit to calculate this figure. When net profit is negative, it is referred to as a net loss.
The average rate of return is calculated by dividing the average yearly net earnings after taxes or return on investment by the original investment or average investment over the project's lifetime, and then expressing the result in percentages.
Hence, Option (b) Average rate of return has Net profit as basis for calculation.
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