When Comparing Two Companies, What Kind of Information Does a Company's

question 59

Multiple Choice

When comparing two companies, what kind of information does a company's rate of return on total assets provide?

• A)How effectively each company uses assets to generate profits
• B)How effectively a company collects cash on credit sales
• C)How effectively each company uses leverage to finance its business
• D)How much profit each company generates with each dollar of sales

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Definitions:

Industry Type

A classification that categorizes companies and business activities into specific sectors based on similar production processes, products, or services.

Price-Earnings Ratio

A financial ratio that measures a company's current share price relative to its per-share earnings.

Return on Total Assets

A financial ratio that measures a company's profitability relative to its total assets, indicating how efficiently assets are used to generate profit.

Tax Expense

The total amount of taxes a company must pay on its income, including federal, state, and local taxes.