Which ratio measures how effectively a firm uses its assets to generate revenue?
A) profitability ratio
B) asset management ratio
C) liquidity ratio
D) leverage ratio

Question

Quizplus · Accepted Answer

Asset management ratios, also known as turnover ratios, measure how effectively a firm uses its assets to generate revenue. This includes ratios such as inventory turnover, accounts receivable turnover, and total asset turnover. Profitability ratios measure a firm's profitability, liquidity ratios measure a firm's ability to meet short-term obligations, and leverage ratios measure a firm's debt-to-equity ratio and financial risk.

Which Ratio Measures How Effectively a Firm Uses Its Assets