Asked by Kenneth Blake on Jul 03, 2024
Verified
Profitability ratios measure:
A) how efficiently a firm uses its assets to generate sales.
B) how much debt the firm is using relative to other sources of financing.
C) how much operating income or net income a firm is able to generate relative to its assets,equity,and sales.
D) the speed with which a company can turn its short-term assets into cash to pay off its short-term debts.
E) the performance of the firm relative to others on a per-share basis.
Profitability Ratios
Financial metrics used to evaluate a company's ability to generate profit relative to its revenue, assets, equity, or other financial metrics.
Operating Income
The profit realized from a business's operations after subtracting operating expenses from gross income.
Net Income
The total profit of a company after all expenses and taxes have been deducted from revenue.
- Discerning and calculating critical financial ratios and their implications.
Verified Answer
ZK
Zybrea KnightJul 08, 2024
Final Answer :
C
Explanation :
Profitability ratios are financial metrics used to assess a business's ability to generate earnings compared to its expenses and other relevant costs incurred during a specific period. These ratios, such as return on assets (ROA), return on equity (ROE), and profit margin, focus on a company's financial performance and efficiency in generating profits from its assets, equity, and sales.
Learning Objectives
- Discerning and calculating critical financial ratios and their implications.