All Other Things Being Equal, a Policy of Holding a Relatively

question 28

Multiple Choice

All other things being equal, a policy of holding a relatively ____ proportion of the firm's total assets in the form of current assets will tend to result in a ____ expected profitability or rate of return on the total assets of the firm.

• A) large; higher
• B) small; higher
• C) constant; higher
• D) constant; lower

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Definitions:

Investment Turnover

A measure of a company's ability to generate sales from its investment in assets, typically used to assess the efficiency of investment usage.

Profit Margin

A ratio of profitability calculated as net income divided by revenue, showing the percentage of each dollar of revenue that results in net income.

Return on Investment

A measure used to evaluate the efficiency or profitability of an investment relative to its cost.

Profit Margin Factor

A financial ratio that indicates the percentage of revenue that exceeds the cost of goods sold, representing the efficiency of a company in generating profit from sales.