Which of the following is a ratio which is used to measure how much a business owes in relation to its

A. Asset turnover

B. Profit margin

C. Gearing

D Return on capital employed 

Answer:

The ratio which is used to measure how much a business owes about its size is the Gearing ratio

Financial ratios are generally classified into the following:

1. Efficiency ratios- These are ratios that measure how companies efficiently utilize its resources to generate revenue and income. These ratios include Asset turnover ratio, accounts receivable turnover ratio Inventory turnover ratio, and others. Asset turnover ratio measures the company's ability to generate revenue by utilizing its assets(Asset turnover ratio=Net sales revenue/Average total assets)
2. Liquidity ratios - These are ratios that measure a company's ability to pay its short term financial obligation. These ratios include; Current ratio, Quick ratio, Cash ratio, and working capital ratio, etc.
3. Gearing or Solvency ratios-These are ratios that measure a company's leverage level. That is the company's level of debt in its capital structure. Which is simply a measure of how much a company owes in relation to its size. The common most gearing ratio is the Debt to Equity ratio (Gearing ratio=Total Debt /Total Equity )
4. Profitability ratios-These ratios measure the earnings of the company in relation to the investment in that company. They include ratios such as return on capital employed, profit margin, return on assets, and return on equity among other ratios. Return on capital employed ratio measures how the company can generate earnings from the capital employed(Return on capital employed=Net Income/Capital employed x 100%; Where, Capital employed =Total assets -Current liabilities). Profit margin measures the company's earnings(Profit) in relation to Revenue generated (Profit margin=Net profit/Revenue x 100%).