Which of the following set of ratios relates the market price of the firm's common stock to selected financial statement items?
Correct answer: D. Market Value Ratios
- A. Liquidity Ratios
- B. Leverage Ratios
- C. Profitability Ratios
- D. Market Value Ratios
Explanation
Market value ratios connect the market price of common stock with accounting figures such as earnings, book value, or cash flow. Liquidity, leverage, and profitability ratios do not specifically use the share’s market price as their defining link.
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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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