Efficiency ratios indicate
I. whether the firm is using its assets productively;
II. whether the firm is liquid;
III. whether the firm is profitable;
IV. how highly the firm is valued by investors
A)I only
B)II only
C)III only
D)III and IV only

Question

Quizplus · Accepted Answer

Efficiency ratios measure how effectively a company is using its assets to generate revenue or profits. Therefore, the correct statement is only I, which indicates that efficiency ratios evaluate whether the company is using its assets productively. II relates to liquidity ratios, III to profitability ratios, and IV to valuation ratios, which are different from efficiency ratios.

Efficiency Ratios Indicate I. Whether the Firm Is Using Its Assets Productively;