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Which ratio or ratios measure the overall efficiency of the firm in managing its investment in assets and in generating return to shareholders?
  • a)
    Gross profit margin and net profit margin.
  • b)
    Return on investment.
  • c)
    Total asset turnover and operating profit margin.
  • d)
    Return on investment and return on equity.
Correct answer is option 'D'. Can you explain this answer?
Most Upvoted Answer
Which ratio or ratios measure the overall efficiency of the firm in ma...
The overall efficiency of a firm in managing its investment in assets and generating return to shareholders can be measured by the following ratios:
1. Return on Investment (ROI):
- ROI measures the profitability of an investment and indicates how well a company is utilizing its assets to generate profits.
- It is calculated by dividing the net profit by the total investment.
- A higher ROI indicates better efficiency in managing assets and generating returns.
2. Return on Equity (ROE):
- ROE measures the return earned by shareholders on their investment in the company.
- It is calculated by dividing the net income by the shareholders' equity.
- ROE reflects both the firm's efficiency in managing assets and its ability to generate profits for shareholders.
Both ROI and ROE provide insights into the overall efficiency of a firm in managing its investment in assets and generating returns for shareholders. These ratios help investors and stakeholders assess the company's performance and make informed decisions.
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Which ratio or ratios measure the overall efficiency of the firm in managing its investment in assets and in generating return to shareholders?a)Gross profit margin and net profit margin.b)Return on investment.c)Total asset turnover and operating profit margin.d)Return on investment and return on equity.Correct answer is option 'D'. Can you explain this answer?
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