Question

Which of the following is an internal forward-looking metric for a company?

A) late payments
B) net profit before tax
C) percent gross profit
D) return on assets
E) sales revenues

Answer 1

The percent gross profit is the internal forward-looking metric for a company. For the example firm, the sales revenue was $1 million, and total expenses were $950,000, resulting in an accounting profit of $50,000.

Step-by-step explanation:

The internal forward-looking metric for a company from the options provided is percent gross profit. This metric offers insight into future profitability by indicating the percentage of revenue that exceeds the cost of goods sold. In contrast, options A, B, D, and E are more reflective of a company's past performance or current financial state rather than its future outlook.

For the self-check question, the firm's accounting profit can be calculated by subtracting the total expenses from the sales revenue. The expenses include labor, capital, and materials, which total $950,000 ($600,000 + $150,000 + $200,000).

Therefore, the accounting profit is:

Sales Revenue - Total Expenses = Accounting Profit

$1,000,000 - $950,000 = $50,000