1. Business
  2. Accounting
  3. true or false please help...

Question: true or false please help...

Question details

True or false

RATIO ASSIGNMENTIB TRUFALSE If the statement is false, make a correction. EM-1 + total debt ratio 2 ROE is equal to ROA when the firm has no debt 3 Assume assets, profits, sales do not change. If the equity multiplier goes up, ROA and ousme ets, profits sasles m ROE will go up increasing NPM. If other things are constant, a firm may be able to increase its ROA and ROE by 4 If other things are constant, a firm may be able to increase its ROA and ROE by S. increasing TATO 6. The use of leverage will always act to increase a firms ROE 7. If a firm buys some inventory with cash, the current ratio does not change, but the quick ratio and cash ratio go down. 8. If a firm sells some inventory for cash (with profit), the current ratio, quick ratio and cash ratio all go up. If a customer pays its accounts receivable, the current ratio, quick ratio and cash ratio all go up 9. If a firm borrows money over long term, the current ratio, quick ratio and cash ratio all go up 10. 11. If a firms inventory turmover ratio is very high, a quick (acid test) ratio is a better measure of liquidity than current ratio. 12. One of the problems with using liquidity ratios(short term solvency ratios) is that these ratios do not consider a companys reserve borrowing power such as a line of credit. So a low current ratio may not be a bad sign for a company with a large reserve of untapped borrowing power 13. The inventory turnover ratio compares sales to inventory For a firm with an inventory turnover of 5, the days sales in inventorytthe age of inventory) are 73 days 14. 15. For a firm with a receivable turnover of 5, the days sales in receivable (the age of receivable, average collection period) are 73 days 16. The lower the inventory turnover, the faster a firm sells its inventory Page 5 of 9

17. The higher the days sales in inventory ratio, the faster a firm sells its inventory 1S. The lower the receivable turnover, the faster a firm collects its receivable. 19. The lower the days sales in receivable (average collection period, age of receivable), the faster a firm collects its receivable. An increase in inventory level would lead to an increase in the inventory turnover and the age of inventory, if other things are constant. 20. An increase in account receivable would lead to an increase in the receivable turnover and the average collection period, if other things are constant. 21. 22. If other things are constant, an increase in a fixed asset turn over would lead to an 23. If other things are constant, an increase in an averaletion period would 24. Total debt ratio measures the extent to which a firms assets are financed by debts 25. A firm has a total debt ratio of.63. This means that that firm has $0.63 in debt for every increase in a total asset turnover t, an increase in an average collection period would lead to an increase in a total asset turnover. $1.00 in total equity. 26. A firm with a debt equity ratio of 3 has a total debt ratio of 0.3 If other things are constant, an increase in selling and administrative expenses would lead to a decrease in net profit margin, and operating profit margin, not gross profit margin. 27. 28. If other things are constant, an increase in interest expenses would lead to a decrease in a 29. If other things are constant, an increase in the cost of goods sold would lead to a decrease 30. If other things are constant, a firm with a low gross profit margin can increase its net 31. If other things are constant, a firm with a low gross profit margin can increase its net 32. The income statement of a firm shows the value of its assets and liabilities over a net profit margin, not gross profit margin or operating profit margin. in a gross profit margin, operating profit margin and net profit margin. profit margin by increasing administrative expenses. profit margin by decreasing interest expenses specified period of time. Page 6 of 9

33. Current retained earnings cumulative net incomes- cumulative dividends paid since the 34. EBIT- operating profit 35. A company which competes with a strong competitor(s) in a very competitive market 36. A company which enjoys a monopoly position in the market tends to have a low net 37. If interest expense is greater than operating profit for a company, then its net profit inception of a firm. tends to have a low net profit margin. profit margin. margin is negative. Apple would have a higher net profit margin than Walmart. 38. A very low receivable turnover ratio may indicate that the firm has an unduly restrictive credit policy and offers credit only to customers who can be relied on to pay promptly. Assume all sales are credit sales. 39. Retained earnings can be negative. Accordingly, the total stockholders equity can be negative 40.

please help

Solution by an expert tutor
Blurred Solution
This question has been solved
Subscribe to see this solution