Which of the Following Statements Provides an Accurate Description of Financial

question 14

Multiple Choice

Which of the following statements provides an accurate description of financial ratios?

• A) Liquidity ratios use information about current assets and current liabilities.
• B) Asset management ratios focus on the relationship between profits and either average inventory or total assets.
• C) Net margin and return on investment are useful leverage ratios.
• D) Leverage ratios are helpful in assessing how well assets are employed in generating sales.
• E) Inventory turnover is one method for determining the company's financial liquidity.

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Definitions:

Fixed Cost

A business expense that does not vary with the level of goods or services produced over the short term.

Interest Rate

The rate, expressed as a percentage of the principal amount, that a borrower must pay to a lender to use their assets.

Disbursement Float

The time lag between when a check is issued by a payer and when the funds are deducted from the payer's bank account.

Checks

Written, dated, and signed instruments that direct a bank to pay a specific sum of money to the bearer or a designated recipient.