Question

true or false

if false make the statement right

1.  If sales increase by​ 5% and total assets fall by​ 1%, the TAT ratio would go down by approximately​ 6%
2.  A decrease in the current ratio indicates an improvement in a​ firm’s liquidity.
3.  An increase in the cash coverage ratio means that a firm is less likely to default on its outstanding debt.
4.  Ceteris paribus​, according to the DuPont​ framework, an increase in the use of debt would increase a​ firm’s ROE.
5.  For firms with lower​ P/E ratios, investors are valuing each dollar of earnings less than for firms with higher​ P/E ratios.
6.  Corporate managers who are doing a better job of serving owners would see the​ market-book ratio their firm exceed the ratio for managers who are not doing as good a job.
7. Ceteris paribus​, the cash coverage ratio and the amount of debt are directly related.
8. "Ratio", "proportion",​ "fraction" and​ "percent" all mean the same. thing.
9. If the​ debt-equity ratio is​ 1.25, the equity multiplier would be 2.50.
10. The higher the equity​ multiplier, the greater is the proportion of a​ firm’s assets that are financed with equity.
11. Common-size values on the balance sheet show each item as a percent of total equity.
12. Every ratio tells us for every one of​ what’s on the​ top, here’s how many we have of​ what’s on the bottom.

Answer 1

If sales increase by​ 5% and total assets fall by​ 1%, the TAT ratio would go down by approximately​ 6%
FALSE (TAT ratio would go up by 6%)

A decrease in the current ratio indicates an improvement in a​ firm’s liquidity.
FALSE (indicates a deterioriation)

An increase in the cash coverage ratio means that a firm is less likely to default on its outstanding debt.
TRUE

Ceteris paribus​, according to the DuPont​ framework, an increase in the use of debt would increase a​ firm’s ROE.
TRUE

For firms with lower​ P/E ratios, investors are valuing each dollar of earnings less than for firms with higher​ P/E ratios.
TRUE

Corporate managers who are doing a better job of serving owners would see the​ market-book ratio their firm exceed the ratio for managers who are not doing as good a job.
TRUE

Ceteris paribus​, the cash coverage ratio and the amount of debt are directly related.
FALSE (inversely related)

"Ratio", "proportion",​ "fraction" and​ "percent" all mean the same. thing.
TRUE

If the​ debt-equity ratio is​ 1.25, the equity multiplier would be 2.50.
FALSE (equity multiplier would be 1+1.25=2.25)

The higher the equity​ multiplier, the greater is the proportion of a​ firm’s assets that are financed with equity.
FALSE (the lesser is the proportion)

Common-size values on the balance sheet show each item as a percent of total equity.
FALSE (as a percent of total assets)