Which of the following is true? I. If there is no change in gross fixed assets from one year to the next, then net fixed assets would have to have decreased. II. For firms with lower P/E ratios, investors are valuing each dollar of earnings more than for firms with higher P/E ratios. III. A increase in the current ratio indicates an improvement in a firm's long-term solvency condition.
Which of the following is true? I. If there is no change in gross fixed assets from one year to the next, then net fixed assets would have to have decreased. II. For firms with lower P/E ratios, investors are valuing each dollar of earnings more than for firms with higher P/E ratios. III. A increase in the current ratio indicates an improvement in a firm's long-term solvency condition.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Which of the following is true?
I. If there is no change in gross fixed assets from one year to the next, then net fixed assets would have to have decreased.
II. For firms with lower P/E ratios, investors are valuing each dollar of earnings more than for firms with higher P/E ratios.
III. A increase in the current ratio indicates an improvement in a firm's long-term solvency condition.
Expert Solution
Step 1Basic Information
The Gross Fixed Assets is the cost of acquisition of the asset. In other words it is the purchase price of the asset. The change in the gross fixed assets takes place on sale or purchase of another assets during the year. The difference between the Gross Fixed Assets and Net Fixed Assets is Depreciation for the year.
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