Which of the Ratios Listed Helps to Indicate Whether a Company

question 34

Multiple Choice

Which of the ratios listed helps to indicate whether a company has enough short-term assets to cover its short-term liabilities?

• A) current ratio
• B) profit margin
• C) debt-to-equity
• D) return on assets.

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Definitions:

Straight-Line Depreciation

A technique for distributing the expense of a physical asset evenly across its life span.

Average Accounting Return

A measure of the profitability of an investment, calculated by dividing the average annual profit by the initial investment cost.

Average Total Assets

The mean value of all assets owned by a company over a specific period, used in financial analysis to gauge the company's asset use efficiency.

Profitability Index

A calculation used to determine the relative profitability of a project by dividing the present value of future expected cash flows by the initial investment.