Quiz Ch 03 – Evaluating Correct Statements in Finance
Fundamentals of Financial Management, Concise
Brigham and Houston
09th Edition
Which statement is ACCURATE in relation to finance?
Which statement is ACCURATE in relation to finance?
How does the difference in total debt to total capital ratio between Companies HD and LD impact their Return on Equity (ROE), given their identical financial characteristics and financing structure?
Which of the following statements about financial ratios, their implications, and decision-making is correct?
How would short-term borrowing and holding the funds in cash accounts affect the current ratios of Safeco and Risco, considering their current assets and liabilities?
True or false: If a firm aims to sustain a particular TIE ratio, and possesses data on its debt, debt interest rate, tax rate, and operating expenses, it can compute the necessary sales volume to attain its desired TIE ratio.
True or false: While Firm A may have a higher current ratio than Firm B, Firm B could still have a higher quick ratio than A. However, if A’s quick ratio surpasses B’s, it’s definite that A’s current ratio is also greater than B’s.
True or false: Given a firm’s ROE of 9% and ROA of 6%, with financing limited to short-term debt, long-term debt, and common equity, where assets match total invested capital, the total debt to total capital ratio must be 50%.
True or false: When a firm’s ROE stands at 9% and its ROA at 6%, the equity multiplier must be 1.5.
True or false: Considering Firms A and B with equal assets, total invested capital, debt interest rate, BEP, financing through debt and equity, and tax rate, but differing debt to capital ratios, if BEP surpasses the debt interest rate, Firm A will yield a higher ROE due to its increased debt ratio.
True or false: Firms A and B share identical current ratios of 0.75, sales, and current liabilities. Yet, Firm A holds a superior inventory turnover ratio to B. Consequently, we can deduce that A’s quick ratio must be lower than B’s.