________ ratios measure how efficiently the firm is using its assets.
A) Liquidity
B) Leverage
C) Profitability
D) Activity

Question

Quizplus · Accepted Answer

Activity ratios, also known as efficiency ratios, measure how effectively a company is using its assets to generate revenue. These ratios include inventory turnover, accounts receivable turnover, and asset turnover ratios, all of which provide insight into the effectiveness of the company's operations. Liquidity ratios measure a company's ability to meet its short-term financial obligations, leverage ratios measure the amount of debt a company has relative to its equity, and profitability ratios measure a company's ability to generate profits.

________ Ratios Measure How Efficiently the Firm Is Using Its