effectiveness and efficiency in this order can be measured by

effectiveness and efficiency in this order can be measured by?

Asset turnover and profit margin

return on equity and return on assets

liabilities and equity

all of the above

The correct answer and explanation is:

The correct answer is “all of the above”.

Explanation:

1. Asset Turnover and Profit Margin:
   These two metrics are key indicators of a company’s effectiveness and efficiency.
   • Asset turnover measures how efficiently a company uses its assets to generate sales. It is calculated by dividing sales by average total assets. A high asset turnover ratio indicates that the company is using its assets efficiently to produce revenue.
   • Profit margin shows the company’s ability to generate profit from its revenue, calculated as net income divided by sales. A high profit margin reflects the company’s effectiveness in controlling costs and generating income from its sales.
   Together, these two ratios can highlight both the effectiveness (profit generation and cost control) and efficiency (asset usage) of a company.
2. Return on Equity (ROE) and Return on Assets (ROA):
   • Return on equity (ROE) measures the profitability of a company in relation to the shareholders’ equity, calculated by dividing net income by average shareholders’ equity. This is a critical indicator of how well the company is using its equity to generate profits, which shows both effectiveness and efficiency in terms of shareholder value.
   • Return on assets (ROA), on the other hand, measures how well a company uses its assets to generate earnings. It is calculated by dividing net income by total assets. A higher ROA suggests that the company is using its assets efficiently to produce profits.
   These two ratios are important for assessing how well the company is performing in terms of profitability and how effectively it utilizes its resources (assets and equity).
3. Liabilities and Equity:
   • Liabilities and equity are both essential parts of a company’s capital structure. They give insights into the financial leverage and funding strategies.
   • Liabilities represent what a company owes, while equity represents the ownership of shareholders. By assessing the balance between liabilities and equity, you can determine the company’s risk profile and how effectively it is managing its financing. An optimal balance between the two indicates efficient financial management and risk control.

In conclusion, all three combinations of metrics (asset turnover & profit margin, ROE & ROA, and liabilities & equity) measure different aspects of a company’s effectiveness and efficiency in generating profit, using assets, and managing financial resources.