- CFA Exams
- CFA Level I Exam
- Topic 4. Financial Statement Analysis
- Learning Module 11. Financial Analysis Techniques
- Subject 5. Profitability Ratios
CFA Practice Question
Which of the following is calculated by a formula that uses net sales as the denominator?
II. Gross profit rate
III. Return on assets
I. Operating expense ratio
II. Gross profit rate
III. Return on assets
Correct Answer: I and II
User Contributed Comments 6
| User | Comment |
|---|---|
| kalps | Op Expense ratio = operating expenses / Net Sales GP = Gross profit / Net Sales |
| carlos3 | ROA = (Net Income + Interest(1-t))/Average total Assets Sad Saturday night for a 25 years old boy. |
| danlan | OP expense ratio is not gross profit/net sales. Rather we have gross profit/net sales=(net sales-OP expense)/net sales=1-OP expense ratio |
| faya | gross profit = sales - COGS op ex = sales - COGS - SG&A expense So GP rate is not equal to OP EX ratio |
| johntan1979 | Careful now! COGS is not op exp, neither is sales. Op exp = SG&A exp Op exp ratio = SG&A / Sales |
| mlaique | Operating Expense Ratio: EBIT / Sales Gross Profit Ratio: Gross Profit / Sales |