The Profitability Ratio That Measures an Entity's Ability to Generate

question 4

Multiple Choice

The profitability ratio that measures an entity's ability to generate a profit from its asset investments is:

• A) profit margin.
• B) return on equity.
• C) gross profit margin.
• D) return on assets.

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Definitions:

FIFO Method

An inventory valuation method that assumes items purchased or produced first are sold first, standing for "First-In, First-Out".

Equivalent Units

A term used in cost accounting to denote a conversion of partially completed goods to an equivalent number of fully completed units.

Process Costing

A costing method used when identical or similar items are mass-produced, allocating costs based on the process or departments through which the products pass.

FIFO Method

A method of inventory valuation where goods are sold or used in the same order in which they are acquired, with the oldest inventory items being recorded as sold first.