The Most Commonly Used Financial Performance Measure That Allows Managers

question 25

Multiple Choice

The most commonly used financial performance measure that allows managers of one organization to compare performance with that of other organizations is:

• A) gross profit margin.
• B) the debt-to-assets ratio.
• C) the days sales outstanding ratio.
• D) the inventory turnover ratio.
• E) return on investment.

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Definitions:

Velocity

The rate at which money circulates within an economy, often measured as the ratio of nominal GDP to the money supply.

Price Level

An index that measures the average relative level of prices of goods and services in an economy over a period of time.

Inflation

The speed at which the overall price level for goods and services increases, thereby diminishing the buying power.

Shoeleather Costs

The resources wasted when inflation encourages people to reduce their money holdings.