Which of the following indicates the ratio between profit and costs?

Mark-up is a financial metric that represents the difference between the selling price of a good or service and its cost, expressed as a percentage of the cost. The formula is (Profit / Cost) × 100. This directly calculates the ratio of profit generated relative to the cost incurred to produce or acquire the item. It is a cost-based pricing tool used by suppliers to determine the selling price and ensure a desired profit is achieved on top of the costs.

A. Gearing: This measures a company's financial leverage by comparing its debt to its equity, indicating its reliance on borrowed funds.

B. Margin: This measures profitability relative to the selling price (revenue), not the cost. The formula is (Profit / Selling Price) × 100.

D. Liquidity: This assesses a company's ability to meet its short-term financial obligations using its current assets.

1. Chartered Institute of Procurement & Supply. (2019). Commercial Contracting (L4M3) Study Guide. Stamford

UK: Profex Publishing. In Chapter 5

'Financial Analysis in Commercial Contracting

' the guide distinguishes between mark-up and margin

stating

"Mark-up is profit as a percentage of cost price... Margin is profit as a percentage of the selling price." (p. 124).

2. Drury

C. (2018). Management and Cost Accounting. 10th ed. Cengage Learning. Chapter 11

'Pricing decisions and profitability analysis

' explains that "A mark-up on cost is the profit margin expressed as a percentage of cost" (p. 368). This text is a standard reference in university-level accounting courses.

3. Weygandt

J. J.

Kimmel

P. D.

& Kieso

D. E. (2021). Financial & Managerial Accounting. 4th ed. Wiley. In the chapter on cost-volume-profit analysis

the text clarifies the calculation: "Markup = (Sales Price - Cost) / Cost

" directly showing it as a ratio of profit to cost (Chapter 5

Section 5.3).