Which Ratio Measures the Operating Return on the Firm's Assets

question 3

Multiple Choice

Which ratio measures the operating return on the firm's assets irrespective of financial leverage and taxes?

• A) Basic earning power ratio
• B) Profit margin
• C) Return on Assets
• D) Operating Leverage Return

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Definitions:

Break-even

The point at which cost or expenses and revenue are equal, resulting in neither profit nor loss.

Long-run Equilibrium

A state in which all factors of production and costs are variable, and firms are making neither excess profits nor losses.

Short-run Equilibrium

Short-run Equilibrium occurs in a market when the quantity supplied equals the quantity demanded at a specific price level, without considering changes in the long run.

Market Participants

Individuals or entities engaging in the buying, selling, or exchange of goods and services in a market.