Which of the following ratios gives information on the amount of profits reinvested in the firm over the years:
A) Sales/total assets
B) Debt/total assets
C) Debt/equity
D) Retained earnings/total assets
E) None of these

Question

Quizplus · Accepted Answer

Retained earnings/total assets gives information on the amount of profits reinvested in the firm over the years. Retained earnings represent profits that have been saved and reinvested in the firm instead of being distributed to shareholders as dividends. Dividing this amount by total assets shows the portion of profits that have been retained and reinvested in the firm's assets. Choices A, B, and C do not provide information on profits reinvested in the firm.

Which of the Following Ratios Gives Information on the Amount