Which of the following statement is correct? O Inventory Turnover Ratio is a measure of how much the market is willing to pay (per share) for one dollar's worth of the firm's recorded earnings per share, and it is measure of the market's perception as to the future earnings potential of the firm. All the answers are incorrect. The times interest earned ratio is equal to Earnings Before Taxes (EBT) divided by Debt, and it is often used to assess a company's ability to service the interest on its debt with operating income from the current period. Asset activity ratios measure the ability of a firm to meet its short-term obligations. When the investors have more confidence about the firm's future growth, then the higher P/E ratio is expected.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Which of the following statement is correct?
O Inventory Turnover Ratio is a measure of how much the market is willing to pay (per share) for one
dollar's worth of the firm's recorded earnings per share, and it is measure of the market's perception
as to the future earnings potential of the firm.
All the answers are incorrect.
The times interest earned ratio is equal to Earnings Before Taxes (EBT) divided by Debt, and it is
often used to assess a company's ability to service the interest on its debt with operating income
from the current period.
Asset activity ratios measure the ability of a firm to meet its short-term obligations.
O When the investors have more confidence about the firm's future growth, then the higher P/E ratio
is expected.
Transcribed Image Text:Which of the following statement is correct? O Inventory Turnover Ratio is a measure of how much the market is willing to pay (per share) for one dollar's worth of the firm's recorded earnings per share, and it is measure of the market's perception as to the future earnings potential of the firm. All the answers are incorrect. The times interest earned ratio is equal to Earnings Before Taxes (EBT) divided by Debt, and it is often used to assess a company's ability to service the interest on its debt with operating income from the current period. Asset activity ratios measure the ability of a firm to meet its short-term obligations. O When the investors have more confidence about the firm's future growth, then the higher P/E ratio is expected.
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