Fill in the Blank QuestionFill in the blank question. ratios measure how effectively a firm is using its various resources to achieve profits.

Understanding the Concept

Ratios are tools used in financial analysis to evaluate how effectively a firm utilizes its resources to generate profits. These ratios provide insights into various aspects of a company's performance, such as profitability, efficiency, and liquidity.

Analyzing the Statement

In the provided statement, we need to fill in the blank with the appropriate type of ratio. The phrase "ratios measure how effectively a firm is using its various resources to achieve profits" indicates that we are discussing a certain category of financial ratios.

The Suitable Term

The most fitting term for this blank is "Profitability ratios." These ratios specifically evaluate a firm's ability to generate earnings compared to its expenses and other costs incurred during a specific period. Common examples of profitability ratios include the net profit margin, return on assets (ROA), and return on equity (ROE).

Final Answer

Profitability ratios measure how effectively a firm is using its various resources to achieve profits.