The Financial Crisis That Began in 2008 Is a Result

question 53

Multiple Choice

The financial crisis that began in 2008 is a result of all of the following except

• A)The bursting of the dot.com bubble
• B)Problems in the residential real estate market
• C)Changes in accounting rules about asset valuation
• D)Large firms taking on assets whose value was not well determined
• E)Policies that allowed many unqualified homebuyers to receive mortgages that they could not pay

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Definitions:

EBIT

Earnings Before Interest and Taxes, a firm's earnings metric, accounts for all operational expenses aside from interest and taxes.

Return on Equity Ratio

The return on equity ratio measures a company's profitability by revealing how much profit a company generates with the money shareholders have invested.

Total Asset Turnover

A financial ratio that measures the efficiency of a company's use of its assets in generating sales revenue by comparing sales with total assets.

Current Ratio

An indicator used to evaluate whether a business can meet its short-term financial liabilities, calculated through the division of its current assets by its current liabilities.