What does the Investment Assets-to-Total Assets ratio indicate?

• A. It is a measure of liquidity.
• B. It tracks annual income growth.
• C. It indicates progress toward financial goals and should rise sharply as retirement approaches.
• D. It shows how much is kept in cash.

Answer: (C)

This ratio shows what portion of your total assets is invested in investment assets rather than held in cash or other non-investment forms. The best answer reflects that this ratio indicates progress toward financial goals because, as retirement approaches, you typically increase your investment allocation to grow the funds you’ll need for retirement. So the investment assets-to-total assets ratio should rise as you accumulate and shift money toward investments to meet long-term objectives. It isn’t a measure of liquidity, which focuses on how readily you can access cash, nor does it track annual income growth. It also doesn’t directly tell you how much is kept in cash, since it compares all investment assets to total assets.