Match Each Ratio That Follows to Its Use Items A-H

question 165

Multiple Choice

Match each ratio that follows to its use items a-h.Items may be used more than once.
-rate earned on common stockholders' equity

• A)assess the profitability of the assets
• B)assess the effectiveness in the use of assets
• C)indicate the ability to meet currently maturing obligations
• D)indicate the margin of safety to creditors
• E)indicate instant debt-paying ability
• F)assess the profitability of the investment by common stockholders
• G)indicate future earnings prospects
• H)indicate the extent to which earnings are being distributed to common stockholders

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Definitions:

Credit Side

The right side of an accounting ledger where increases in liabilities, equity, and revenue accounts, or decreases in assets and expense accounts are recorded.

Normal Balance

The side (debit or credit) of an account that is typically increased. For assets and expenses, it's debit; for liabilities, equity, and income, it's credit.

Account

A record that keeps track of all financial transactions related to an asset, liability, equity, revenue, or expense.

Increases

The action or process of becoming larger in quantity, size, amount, or degree in a financial or numerical context.