Which of the Following Ratios Measures Profitability

question 73

Multiple Choice

Which of the following ratios measures profitability?

• A) rate of return on total assets
• B) times-interest-earned ratio
• C) inventory turnover
• D) book value per share of common shares

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Definitions:

Checkable Deposits

Bank accounts from which individuals can deposit and withdraw money using checks, ATM transactions, and electronic payments.

Reserve Requirement

The minimum fraction of customer deposits that each bank must hold as reserves, rather than lending out, as mandated by the central bank.

Simple Money Multiplier

A formula that determines the maximum amount of money that banks can create with a given level of reserves.

Excess Reserves

Banks' reserves that exceed the minimum required by the central bank, available for lending or investment.