What is an indicator of a business's ability to manage expenses relative to sales?

The net profit margin is indeed a critical indicator of a business's ability to manage expenses in relation to its sales. It represents the percentage of revenue that remains as profit after all operating expenses, interest, taxes, and other costs have been deducted. A higher net profit margin indicates that a business is effectively controlling its expenses relative to its sales, which is a vital sign of profitability and financial health.

In contrast, other choices provide different insights. Return on assets measures how efficiently a company uses its assets to generate profit, but it does not specifically tie expenses to sales. The liquidity ratio assesses a company's ability to cover short-term obligations but doesn't focus on expense management. The debt ratio evaluates the proportion of a company’s assets that are financed by debt, giving insight into leverage but not expenses relative to income. Therefore, net profit margin directly addresses the relationship between expenses and sales, making it the right choice in this context.