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

question 14

Multiple Choice

Match each ratio that follows to its use (items a-h) . Items may be used more than once.
-Ratio of liabilities to stockholders' equity

• A)Assess the profitability of the assets
• B)Assess how effectively assets are used
• C)Indicate the ability to pay current liabilities
• D)Indicate how much of the company is financed by debt and equity
• 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:

Profit Opportunities

Situations where individuals or firms can earn a return on investment that is more than the norm, often due to market inefficiencies or information asymmetries.

Opportunity Cost

The cost of choosing one option over another, represented by the benefits that could have been obtained by choosing the alternate option.

Opportunity Cost

Neglecting possible gains from other scenarios by focusing on a singular choice.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision, representing the benefits one could have received by taking a different course of action.