The ________ ratios are primarily measures of return.
A) liquidity
B) activity
C) debt
D) profitability

Question

Quizplus · Accepted Answer

Profitability ratios are metrics used to evaluate a company's ability to generate income and profits over a certain period of time. These ratios primarily assess a company's ability to generate earnings and profits from its operations, which ultimately leads to an increase in the shareholders' wealth. Therefore, profitability ratios are primarily measures of return. Liquidity ratios, on the other hand, evaluate a company's ability to meet short-term financial obligations, while activity ratios assess a company's efficiency in managing its assets. Debt ratios indicate the amount of leverage used by a company and its ability to meet long-term obligations.

The ________ Ratios Are Primarily Measures of Return