Which of the following set of ratios is used to assess a business's ability to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time?
Correct answer: C. Profitability Ratios
- A. Liquidity Ratios
- B. Leverage Ratios
- C. Profitability Ratios
- D. Market Value Ratios
Explanation
Profitability ratios assess how effectively a business generates earnings from its sales, assets, or equity after considering its costs. Liquidity ratios instead focus on meeting short-term obligations, while leverage ratios focus on debt use.
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About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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