Which of the Following Ratios Would Be the Most Helpful

question 11

Multiple Choice

Which of the following ratios would be the most helpful to an investor who is investing in ordinary shares primarily for dividends rather than for appreciation in market price?

• A) dividend yield.
• B) current ratio.
• C) rate of return on ordinary equity.
• D) return on total assets.

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Definitions:

Unrealized Profits

Profits that have been generated on paper through investments and other financial instruments but have not yet been realized through actual transactions.

Journal Entry

A recorded transaction in the financial accounting system, documenting the debits and credits necessary to maintain the balance sheet's integrity.

Inventory

Items that a company holds for the purpose of selling in the normal course of business, or materials used in the production of goods to be sold.

Dividends

Funds disbursed by a company to its stockholders, typically from earnings.