, all other things 1. The greater the amount of financial leverage used by a firm, the greater its being equal. a. profitability b. liquidity c. risk d. size 2. The ratio measures the relative profitability of a firm's sales after the cost of sales has been deducted. a. gross profit margin b. net profit margin c. return on investment d. return on stockholders' equity 3. A firm that keeps current asset balances too high a. sacrifices shareholder wealth b. incurs higher risk c. is not able to offer timely and profitable responses to prospective customers' needs d. All of these are correct 3 ABC 4. Asset management ratios indicate a. how well a firm is using its assets to generate sales b. how efficiently a firm is allocating its liabilities c. the return on assets d. the profitability of the firm $. Financial ratios can be used to make a comparison of a company's financial condition from a. day to day b. period to period c. purchase to purchase d. sale to sale