Question

In: Finance

1. Which of the following statements are true? Select all that apply. Select one or more:...

1. Which of the following statements are true? Select all that apply.

Select one or more:

a. Earnings per share is calculated by dividing retained earnings by the number of shares of common stock outstanding.

b. The creditors of a firm must be satisfied before any earnings can be distributed to the common shareholders.

c. When referring to ratio comparisons, time-series analysis compares a firm to that of an industry leader.

d. The operating profit margin must take into account interest and taxes.

e. The more financial leverage that a firm uses, the greater will be its risks and expected return.

Solutions

Expert Solution

b. The creditors of a firm must be satisfied before any earnings can be distributed to the common shareholders.

e. The more financial leverage that a firm uses, the greater will be its risks and expected return.

the above is answer..

because creditors has first right before the shareholders. more financial leverage means more fixed obligations which can result in liquidation of the company in case the company is not able to pay to creditors as per the credit term.


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