Final answer:
Hunter was calculating his business's profit margin, which is an indicator of financial health and profitability, calculated as net income divided by revenue. Using this measure, he can assess how much profit his business retains from sales.
Step-by-step explanation:
Last year, Hunter was calculating the profit margin of his computer parts resale business when he computed the ratio of last year's earnings to last year's sales. The profit margin is an important business performance measure that indicates how much of each dollar of sales a company actually keeps in earnings. It is defined as net income divided by revenue or net profits divided by sales for a given period of time, which is a measure of the company's financial health, efficiency, and profitability. Using the self-check questions as an example, if a firm had sales revenue of $1 million last year and spent $600,000 on labor, $150,000 on capital, and $200,000 on materials, the firm's accounting profit would be the total revenues minus explicit costs. In this scenario, the accounting profit would be $1,000,000 (revenue) - $600,000 (labor) - $150,000 (capital) - $200,000 (materials) = $50,000.