The Most Meaningful Basis for Comparing Operating Ratios Is

question 60

Multiple Choice

The most meaningful basis for comparing operating ratios is:

• A)other companies of similar size in the same industry.
• B)companies within the neighborhood.
• C)major corporations in the same industry.
• D)all publicly traded companies.

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Definitions:

Financial Leverage

The action of using debt to magnify the expected return on an investment.

Operating Income

Income from a company's main business activities, excluding deductions for interest and taxes, showing the profitability from core operations.

ROE

Return On Equity, a measure of financial performance calculated by dividing net income by shareholders' equity, indicating how efficiently a company uses investments to generate earnings growth.

EPS

Earnings per share, a company's net profit divided by the number of its outstanding shares, indicating profitability.