Answer the following statements true (T) or false (F)
1. The lower the fixed-payment coverage ratio, the lower is the firm's financial leverage.
2. The higher the debt ratio, the more the financial leverage a firm has and thus, the greater will be its risk and return.
3. Typically, higher coverage ratios are preferred, but a very high ratio may indicate under-utilization of fixed-payment obligations, which may result in unnecessarily low risk and return.
4. The higher the value of the times interest earned ratio, the higher is the proportion of the firm's interest income compared to its contractual interest payments.
5. The magnification of risk and return introduced through the use of fixed-cost financing, such as debt and preferred stock is called financial leverage.
1. FALSE
2. TRUE
3. TRUE
4. FALSE
5. TRUE
`
You might also like to view...
In marketing terms, benefits define a product's ________, or what the product does for a customer
A) utility B) warranty C) tangibility D) intangibility E) variability
Which of the following is true regarding the remeasurement of inventories upward to an amount exceeding their acquisition cost?
a. Acquisition cost leads to a more conservative measure of inventories and net income during the periods prior to sale. b. An increase in the market value of inventory likely permits the firm to raise its selling price. c. The firm realizes the benefit of that increase in the period of sale when the firm actually obtains a higher selling price. d. Both U.S. GAAP and IFRS delay recognition of any increase in inventory valuation in net income until the period of sale. e. all of the above
Which of the following is not a true statement about passive voice?
A) You want to inform an applicant tactfully that he was not chosen for the job. B) The identity of the person doing the action is unimportant. C) It emphasizes the receiver of the action instead of the doer of the action. D) It may not indicate who performed the action. E) The verb voice, either active or passive, directly affects the verb tense.
The harvest or exit strategies set out in a business's plan is important not only to the entrepreneur but also to ________.
A. consumers B. the IRS C. investors D. employees