Which of the Following Profitability Ratios Measures the Firm's Efficiency

question 8

Multiple Choice

Which of the following profitability ratios measures the firm's efficiency in generating sales and profits from the total amount invested in the company?

• A) Inventory turnover
• B) Gross profit margin
• C) Return on assets
• D) Net interest expense

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Definitions:

Bad Debt Expense

The cost associated with accounts receivable that a company does not expect to collect due to customer default.

Allowance For Doubtful Accounts

The contra asset account for accounts receivable.

Adjusting Journal Entry

A record in accounting that is used to adjust incomes and expenses to match the accounting period in which they actually occurred.

Net Realizable Value

The estimated selling price of goods minus the costs of their sale or disposal.