Since converting the firm's inventory to profits is a key function of management, firms use ______ to measure the effectiveness of management in utilizing the assets that are available.Multiple choice question.leverage ratiosdebt ratiosactivity ratiosliquidity ratios
Question
Since converting the firm's inventory to profits is a key function of management, firms use ______ to measure the effectiveness of management in utilizing the assets that are available.Multiple choice question.leverage ratiosdebt ratiosactivity ratiosliquidity ratios
Solution
The correct answer is "activity ratios". Activity ratios are used by firms to measure the effectiveness of management in utilizing the available assets. These ratios, also known as efficiency ratios or asset utilization ratios, measure how efficiently a firm can use its assets to generate sales or profits.
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ratios measure how effectively a firm is using its various resources to achieve profits.
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