Which of the Following Statements Provides an Accurate Description of Financial

question 210

Multiple Choice

Which of the following statements provides an accurate description of financial ratios?

• A) Liquidity ratios use information about current assets and current liabilities.
• B) Asset management ratios focus on the relationship between profits and either average inventory or total assets.
• C) Net margin and return on investment are useful leverage ratios.
• D) Inventory turnover is one method for determining the company's financial liquidity.
• E) Leverage ratios are helpful in assessing how well assets are employed in generating sales.

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Definitions:

Profit Margin

Net income divided by sales.

Expenses

The costs incurred in the day-to-day operations of an organization.