Profitability Ratios Allow One to Measure the Ability of the Firm

question 54

True/False

Profitability ratios allow one to measure the ability of the firm to earn an adequate profit compared to sales, total assets, and invested capital.

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Definitions:

Parent Company

A company that owns more than 50% of the common stock of another entity.

Stockholders' Equity

Represents the owners' residual interest in the corporation's assets after deducting liabilities.

Total Revenues

The sum of money made from sales of goods or services that are central to the business's core activities.

Equity Method

An accounting technique used to record an investor's proportional share of the profits or losses from an investment in another entity.