Which of the following is true of the return ratio?

A. It indicates how easily an organization’s assets are converted into cash.
B. It reflects an organization’s ability to meet long-term financial obligations.
C. It shows managers and investors the earnings an organization is generating relative to its assets.
D. It helps estimate an organization’s ability to cover interest expenses on borrowed capital.
E. It indicates the effectiveness of specific functional areas in an organization.

ANSWER: C. It shows managers and investors the earnings an organization is generating relative to its assets.