The rate of return on total assets and the rate of return on common stockholders' equity are used to evaluate the:
A) profitability of the business.
B) liquidity of the business.
C) ability to pay current liabilities with current assets.
D) cash flow of the business.

Question

Quizplus · Accepted Answer

The rate of return on total assets and the rate of return on common stockholders' equity are both measures of profitability. The rate of return on total assets measures the overall profitability of the business, while the rate of return on common stockholders' equity measures the profitability from the perspective of the common shareholders. Both ratios are important measures of a company's profitability and are frequently used by investors and analysts to evaluate the financial performance of a company.

The Rate of Return on Total Assets and the Rate