Final answer:
The profit margin ratio is the ratio that must appear on the face of every income statement as it assesses a company's profitability and efficiency in generating profit from sales.
Step-by-step explanation:
The ratio that is considered so important that it must appear on the face of every income statement is the profit margin ratio. This ratio is calculated by dividing net income by net sales and multiplying the result by 100 to express it as a percentage.
Profit margin ratio is crucial in assessing a company's profitability and its ability to generate profit from its sales revenue. It provides insights into the efficiency of a company's operations and its pricing strategy. A higher profit margin ratio indicates that a company is more efficient in generating profit from its sales.
For example, if a company has a profit margin ratio of 15%, it means that for every dollar of sales revenue, the company is able to generate a net income of $0.15. This ratio helps investors, analysts, and creditors evaluate a company's financial performance and make informed decisions.