Which of the Following Ratios Measures How Efficiently the Firm

question 70

Multiple Choice

Which of the following ratios measures how efficiently the firm uses all of its assets to generate sales?

• A) fixed asset turnover
• B) total asset turnover
• C) debt ratio
• D) times interest earned ratio

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Definitions:

Profit Margins

Financial ratios that measure the percentage of profit a company generates from its revenues, indicating the efficiency at which a company converts sales into profits.

Asset Turnover Ratios

Asset turnover ratios measure how efficiently a company uses its assets to generate sales, indicating operational efficiency.

Financing Policies

These are strategies that a company formulates for managing its finances, including decisions on debt, equity, and internal financing methods.

Equity Multiplier

A financial leverage ratio that measures the portion of a company's assets that are financed by shareholders' equity.