The Ratio That Measures a Company's Success in Using Its

question 116

Multiple Choice

The ratio that measures a company's success in using its assets to earn income for the persons who finance the business is the:

• A)leverage.
• B)rate of return on total assets.
• C)debt ratio.
• D)times-interest-earned ratio.

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Definitions:

Composite Unit

A grouping of assets or costs that are combined and treated as a single unit for accounting or valuation purposes.

Variable Costs

Expenses that vary directly with the level of production or sales volume, such as raw materials and labor.

Fixed Costs

Costs that do not vary with the level of production or sales, such as rent, salaries, and insurance expenses.

Break Even

The point at which total costs and total revenues are equal, resulting in no net loss or gain.