The Ratio Which Is Considered to Be the Primary Measure

question 9

Multiple Choice

The ratio which is considered to be the primary measure of overall profitability as it assesses how effectively the business has used its funds is:

• A) return on ordinary shareholders' funds.
• B) gross profit margin.
• C) return on capital employed.
• D) operating profit margin.

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Definitions:

Equipment Exchanges

Transactions where businesses trade equipment with each other, often to update or upgrade their operational assets without significant cash outflows.

Commercial Substance

Transactions that cause a significant change in the future cash flows of a company.

Carrying Amount

The book value of assets and liabilities as recorded in an entity's financial statements, minus any accumulated depreciation or amortization.

Straight-Line Method

An approach to depreciation that involves evenly allocating an asset's cost over the period of its useful life.