Bob Stewart plans to visit his financial planner today to discuss investment strategy.As a young,"20 something" accountant,he knows he can afford to invest in a few riskier investments.Which of the following ratios will be an important measure of profitability for Bob?

Question

Quizplus · Accepted Answer

Return on equity is a measure of profitability that shows how much profit a company generates with the money invested by shareholders. As Bob is a young investor, he can afford to take more risks and invest in riskier investments with the potential of earning higher returns. Therefore, return on equity will be an important measure of profitability for Bob. The other ratios (return on sales, inventory turnover, and acid test ratio) are important financial ratios, but they do not directly measure profitability.

Bob Stewart Plans to Visit His Financial Planner Today to Discuss