Which of the following financial ratios is the best measure of how effectively a firm's management is serving its stockholders?
A)Current ratio
B)Debt ratio
C)Average collection period
D)Return on equity

Question

Quizplus · Accepted Answer

Return on equity (ROE) is a financial ratio that measures a company's profitability by calculating how much profit a company generates with the money invested by its shareholders. A high ROE means that the company is generating a good return on the shareholders' investment, indicating that the management is effectively serving its stockholders. The other ratios listed (current ratio, debt ratio, and average collection period) are important for different aspects of financial analysis, but they do not directly measure the effectiveness of management in serving stockholders.

Which of the Following Financial Ratios Is the Best Measure