Which of the Following Ratios Would Be the Most Useful

question 4

Multiple Choice

Which of the following ratios would be the most useful to assess the risk associated with a firm being able to pay off its short-term line of credit?

• A) return on equity
• B) the acid test ratio
• C) the operating profit margin
• D) the fixed asset turnover

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Definitions:

Output Effect

Output Effect is the impact on total production or output when a firm adjusts its resources, such as labor or capital, in response to changes in market conditions.

Substitute Resource

A resource or product that can be used in place of another to fulfill a similar function or need.

Marginal Revenue Product Curve

A graphical representation showing how the revenue generated from selling an additional unit of a good or service changes as more units are produced.

Purely Competitive Seller

A firm operating in a market where it must accept the prevailing market price and cannot influence it.