Asked by David Crouch on Jul 11, 2024
Verified
If management wishes to measure how effectively the assets were used in generating a profit, they could use the:
A) rate of return on total assets.
B) rate of return on common stockholders' equity.
C) return on sales.
D) times interest earned.
Rate of Return
The increase or decrease in value of an investment over a certain time frame, shown as a percentage of the investment's original price.
Total Assets
The total value of everything a company owns, encompassing cash, stocks, real estate, and machinery.
Common Stockholders
Investors who own shares of common stock in a company, granting them voting rights and a share in the company's profits through dividends.
- Distinguish between different types of financial ratios and their purposes.
- Interpret the implications of financial ratios for a company's financial management.
Verified Answer
MF
Melynda FrostJul 11, 2024
Final Answer :
A
Explanation :
The rate of return on total assets measures how effectively a company uses its assets to generate profit, by comparing net income plus interest expense (to neutralize the effect of leverage) to the average total assets.
Learning Objectives
- Distinguish between different types of financial ratios and their purposes.
- Interpret the implications of financial ratios for a company's financial management.