The Return on Assets Ratio

question 31

Multiple Choice

The return on assets ratio

• A)considers the investments made by all creditors and stockholders of the company.
• B)reflects investments made only by creditors of the company.
• C)is based on average stockholders' equity as compared to net income for the period.
• D)is a measure of the company's liquidity.

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Definitions:

Leverage Ratio

A financial ratio indicating the degree to which a company or individual is financing its operations through debt, compared to its equity.

LIFO

"Last In, First Out," an inventory management method where the most recently produced or acquired items are the first to be used or sold.

FIFO

An accounting and inventory method where the first items produced or acquired are the first ones to be sold or used, standing for "First-In, First-Out".

Current Ratio

A liquidity ratio that measures a company's ability to cover its short-term obligations with its current assets.