A ratio of profit to capital used or a rate of return from capital is referred to as
A) The debt-equity ratio.
B) The profitability ratio.
C) Return on investment (ROI).
D) The current ratio.
E) The leverage ratio.

Question

Quizplus · Accepted Answer

Profitability ratios indicate management's ability to generate a financial return on sales or investment. For example, return on investment (ROI) is a ratio of profit to capital used, or a rate of return from capital (equity plus long-term debt). This ratio allows managers and shareholders to assess how well the firm is doing compared with other investments.

A Ratio of Profit to Capital Used or a Rate