Which Two Ratios Would Be Most Helpful in Managing a Firm's

question 5

Multiple Choice

Which two ratios would be most helpful in managing a firm's capital structure?

• A) Book Debt to Equity, Current Ratio
• B) Debt to Value Ratio and Times Interest Earned
• C) Debt to Assets, Profit Margin
• D) Payables Turnover, Return on Assets

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Definitions:

Earnings

The amount of money that a company makes during a specific period, usually defined as profit after all expenses have been subtracted from revenue.

Dividends

Payments made by a corporation to its shareholder members, typically a portion of the earnings decided by the board of directors.

Asset Turnover Ratio

A financial metric that measures the efficiency of a company in generating sales revenue from its assets.

Financial Statements

Consolidated documents showing the financial health of an entity, including balance sheets, income statements, and cash flow statements.