Memorandum Flashcards
(4 cards)
Earning Capacity Definition
Earning capacity is the ability to earn income within the current financial structure of the business.
Gross Profit Ratio Definition
The gross profit ratio indicates the ability of an enterprise to generate an acceptable net profit, return on owner’s investment and whether it can meet its other operating expenses.
Net Profit Ratio Definition
The purpose of the net profit ratio is to show the effectiveness of managers to minimise expenses per dollar of sales.
The Rate of Return on Owner’s Equity Definition
The rate of return on owners equity indicates the return on the owner’s investment in the business.