Asked by Guillermo Orizaba on Jul 04, 2024
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When the return on total assets is greater than the return on common stockholders' equity, the management of the company has effectively used leverage.
Return Ratio
A measure of the profitability or effectiveness of an investment, calculating how much returns are gained relative to the investment's cost.
Common Stockholders' Equity
The portion of a company's equity that is attributable to the holders of its common stock.
Leverage
The use of debt to increase the return on an investment.
- Familiarize oneself with the outcomes of changes in financial ratios and what they reveal about a company's financial condition and the efficacy of its operations.
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Learning Objectives
- Familiarize oneself with the outcomes of changes in financial ratios and what they reveal about a company's financial condition and the efficacy of its operations.
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