10. Evaluate the below statements: 1. If the ratio of total liabilities to shareholder's equity increases, a ratio that must also increase is the total liabilities to total assets ratio. II. When compared to a debt-to-asset ratio, a debt-to-equity ratio would be higher than the debt-to-asset ratio. lI. A measure of the company's long-term debt paying ability is times interest earned ratio. Which of the below statements is/are false? a. Statements I and II are true. Ob. Only statement III is false. c. Statement III is true. d. All statements are true

10. Evaluate the below statements: 1. If the ratio of total liabilities to shareholder's equity increases, a ratio that must also increase is the total liabilities to total assets ratio. II. When compared to a debt-to-asset ratio, a debt-to-equity ratio would be higher than the debt-to-asset ratio. lI. A measure of the company's long-term debt paying ability is times interest earned ratio. Which of the below statements is/are false? a. Statements I and II are true. Ob. Only statement III is false. c. Statement III is true. d. All statements are true

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Is there a readily recognisable debt-to-equity ratio that maximises a firm's value? What are your reasons for or against?
Determine the formula for EVA. (WACC = Weighted-average cost of capital) After tax operating inc. Current liabilities Market value of debt Market value of equity Operating income Revenues Total assets WACC x ( )) = EVA
Need help with this Question please provide
which one is correct please confirm? Q24: In determining the cost of debt, several factors must be considered. All of the following are those factors EXCEPT ____. a. flotation costs b. the firm’s growth rate of dividends c. the firm’s before-tax cost of debt d. the firm’s tax rate
Give typing answer with explanation and conclusion If the company were to borrow more (or less), how would that impact the cost of debt and the WACC? Provide a specific assumed example. Weight of Equity 76.10% Weight of Debt 23.90% Cost of Equity 6.98% Cost of Debt 2.55% Tax Rate WACC 5.92%
In the following balance sheet, estimate the impact on the economic value of equity (EVE). If interest rates of assets fall by 1% and deposit rates increase by 1%. EVE=$()
4. (Question 4 is composed of two parts.) The DuPont formula defines the net return on shareholders' equity as a function of the following components: • Operating margin Asset turnover Interest burden Financial leverage Income tax rate Using only the data in the table shown below: a. Calculate each of the five components listed above for 2010 and 2014, and calculate the return on equity (ROE) for 2010 and 2014, using all of the five components. Show calculations. b. Briefly discuss the impact of the changes in asset turnover and financial leverage on the change in ROE from 2010 to 2014. Income Statement Data Revenues Operating income Depreciation and amortization Interest expense Pretax income Income taxes Net income after tax Balance Sheet Data Fixed assets Total assets Working capital Total debt Total shareholders' equity 2010 $542 38 3 3 32 13 19 2010 $41 245 123 16 159 2014 $979 76 9 0 67 37 30 2014 $70 291 157 0 220
13. A short-term creditor would be interested in A. profitability ratio. B. efficiency ratio. C. liquidity ratio. D. leverage ratio. The quick ratio of a firm would be unaffected by which of the following? 14. A. Land held for investment is sold for cash. B. Equipment is purchased, financed by a long-term debt issue. C. Inventories are sold for cash D. Inventories are sold on a credit basis.
Evaluate the company’s solvency and capital structure using leverage ratios and interpret your findings using the following ratios marks):a. Debt Ratiob. Equity Ratioc. Debt to Equity Ratiod. Long term debt to total capitalizatione. Times Interest Earned Ratio
Which of the following statements are true about the interest-burden ratio? Check all that apply: It can be expressed as EBIT/Interest Expense. If the company has no financial leverage, the interest-burden ratio will be equal to 0. A company with higher financial leverage will have a lower interest-burden ratio. If the company has no financial leverage, the interest-burden ratio will be equal to 1. It can be expressed as Net profits/Pretax profits.
Which of the following is NOT a measure of a company's profitability? a) Return on Investment (ROI) b) Earnings Before Interest and Taxes (EBIT) c) Gross Profit Margin d) Debt -to-Equity Ratio
Describe the debt-to-equity ratio and explain how creditors and owners use this ratio to evaluate a company’s risk.