________ ratios give investors an idea of what returns they can expect on their investment; dividing ________ by total owners' equity is one such ratio.
A) Profitability; earnings per share
B) Long-term liquidity; net income
C) Activity; average inventory
D) Short-term liquidity; earnings per share
E) Profitability; net income

Question

Quizplus · Accepted Answer

The question is asking for a ratio that gives investors an idea of what returns they can expect on their investment, which is a measure of profitability. Dividing net income by total owners' equity gives us the return on equity (ROE) ratio, which measures the amount of profit a company generates relative to the amount of shareholder equity. Therefore, the correct answer is E) Profitability; net income.

________ Ratios Give Investors an Idea of What Returns They