A common measure of profitability is the
A)current ratio.
B)cash current debt coverage ratio.
C)return on common shareholders' equity ratio.
D)debt to total assets ratio.

Question

Quizplus · Accepted Answer

Return on common shareholders' equity ratio measures the company's ability to generate profits from the investment made by common shareholders. It is a reliable measure of profitability as it takes into account both the income and the equity invested by shareholders. The higher the return on common shareholders' equity ratio, the more profitable the company is. The other options given (current ratio, cash current debt coverage ratio, and debt to total assets ratio) measure liquidity, solvency, and financial leverage, respectively, but not specifically profitability.

A Common Measure of Profitability Is the