The Rate of Return on Total Assets Measures a Company's

question 107

Multiple Choice

The rate of return on total assets measures a company's ________.

• A) ability to meet its short-term obligations
• B) ability to repay its long-term debt
• C) success in using assets to earn income
• D) success in earning high returns on investments in stocks and bonds of other companies

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Definitions:

Short-Run Exposure

Refers to the degree to which a company's financial performance is affected by fluctuations in foreign exchange rates over a short period.

Home Currency Approach

A method of currency risk management that converts all foreign currencies and related activity into the domestic currency of the company for analysis and reporting.

Foreign Currency Approach

A strategy or method for managing the risks and effects of foreign exchange rate fluctuations on investments or business transactions.

Capital Budgeting

The process a business undertakes to evaluate potential major projects or investments, such as new machinery, expansion of production or new facilities.