Which of the Ratios Listed Helps to Indicate the Ability

question 37

Multiple Choice

Which of the ratios listed helps to indicate the ability of a company to generate a return on its assets before considering the cost of financing those assets?

• A) current ratio
• B) profit margin
• C) quick ratio
• D) return on assets.

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Definitions:

Cost Allocation Method

A technique used to assign indirect costs to products, services, or departments based on relevant cost drivers.

Overhead Per Drum

The allocation of indirect production costs to each drum produced, considering expenses not directly tied to production like rent and utilities.

Variable Factory Overhead

Costs in manufacturing that vary with the level of production output, including items like utilities and materials consumed in production.

Fixed Manufacturing Overhead

Refers to the stable costs associated with producing goods, such as factory rent and salaries, which do not change regardless of production levels.