Question

Which of the following ratios is relatively more helpful in highlighting revenue-related frauds?

1) Current ratio
2) Gross profit ratio
3) Net profit ratio
4) Return on investment ratio

Answer 1

The Net profit ratio is relatively more helpful in highlighting revenue-related frauds.

Step-by-step explanation:

The ratio that is relatively more helpful in highlighting revenue-related frauds is the Net profit ratio.

The Net profit ratio is calculated by dividing the net profit by the net sales and multiplying by 100. This ratio gives an indication of the company's profitability after deducting all expenses, including revenue-related frauds.

In contrast, the Current ratio measures a company's short-term liquidity, the Gross profit ratio measures the profitability of the company's sales, and the Return on investment ratio assesses the efficiency of the company's use of its investments.