An Investor Wanting Large Returns Will Be Interested in Companies

question 23

Multiple Choice

An investor wanting large returns will be interested in companies that have

• A) high ROAs.
• B) high ROEs.
• C) high current ratios.
• D) high times interest earned.

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Definitions:

Days' Sales

A financial metric that calculates the average time it takes for a company to convert its inventory into sales.

Receivables Ratio

The Receivables Ratio, also known as the Accounts Receivable Turnover Ratio, measures how efficiently a company collects cash from its customers by comparing sales to the average receivables.

Outstanding Accounts

Accounts or invoices that have been billed but not yet paid by customers.

EBIT

Earnings Before Interest and Taxes, a financial metric indicating a company's operating profitability by excluding interest and taxes from earnings.