Which of the following financial ratios is the best measure of how effectively a firm's management is serving its stockholders?
A) Current ratio
B) Debt ratio
C) ACP
D) Return on equity

Question

Quizplus · Accepted Answer

Return on equity measures the profitability of a company in relation to the amount of shareholder equity. It is an important indicator of how effectively a firm's management is using shareholders' investments to generate profits. The other three ratios do not directly measure the effectiveness of management in serving stockholders. Current ratio measures a firm's ability to pay off short-term liabilities, debt ratio measures the proportion of debt to total assets, and ACP measures the efficiency of a firm's collection of accounts receivable.

Which of the Following Financial Ratios Is the Best Measure