1. Which financial ratio measures the effectiveness of management in generating returns to common stockholders based on the cumulative amount of funds invested for the benefit of the owners?
a. Gross profit margin
b. Return on assets
c. Return on equity
d. Current ratio
2. When is the return on assets equal to the return on equity?
a. When the current ratio of the firm equals 1.
b. When the firm issues equal amounts of long term debt and common stock.
c. When the firm issues no dividends for a given time period.
d. When the firm only issues equity to finance the purchase of assets.