The type of ratio that indicates the firm's ability to provide adequate returns in the form of dividends and share price appreciation is:
A)Profitability ratios
B)Asset management ratios
C)Liquidity ratios
D)Financial leverage management ratios

Question

Quizplus · Accepted Answer

Profitability ratios such as Return on Equity (ROE), Return on Assets (ROA), and Earnings per Share (EPS) indicate the firm's ability to generate profits from its operations. If the firm performs well in terms of profitability, it can use the profits to pay dividends and reinvest in the business, which can lead to an increase in share price. Therefore, profitability ratios are a good indicator of the firm's ability to provide adequate returns to its investors.

The Type of Ratio That Indicates the Firm's Ability to Provide