- CFA Exams
- CFA Level I Exam
- Topic 4. Financial Statement Analysis
- Learning Module 11. Financial Analysis Techniques
- Subject 5. Profitability Ratios

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**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

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**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 |