If an Auditor Was Interested in Determining a Client Firm's

question 73

Multiple Choice

If an auditor was interested in determining a client firm's ability to generate income from its investments, the best ratio to calculate would be _________.

• A)the times interest earned
• B)debt to assets ratio
• C)return on assets
• D)return on equity

---

Definitions:

Lend Money

The act of giving money to another party under the agreement that it will be repaid, often with interest, at a future date.

Unanticipated Inflation

Inflation that occurs when the general level of prices rises at a rate that was not forecasted or expected by consumers, businesses, or economists.

Saving

The portion of income not spent on current consumption but rather set aside for future use.

Borrowing

The act of obtaining funds from another party with the promise to repay the principal amount along with interest or other charges.