In cases of a publicly traded company audit in the United States, when International Standards on Auditing (ISAs) conflict with the PCAOB, standards, which of the following is correct?
A. The ISA is applicable.
B. The substance of the conflict should be analyzed, and the ISA or PCAOB treatment that seems more appropriate is applicable.
C. Both sets of standards have equal applicability.
D. The PCAOB standard is applicable.
Answer: D
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That the real interest rate will be the nominal interest rate minus the expected rate of inflation is known as the ______________.
Fill in the blank(s) with the appropriate word(s).
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This year, Ferro Inc. generated sales of $10 million. Its fixed operating cost is $1 million and its variable cost ratio is 30 percent of sales. Ferro has $60 million of debt outstanding with a before-tax cost of 12 percent. Which of the following statements about Ferro's times interest earned (TIE) ratio is correct?
A. Ferro's TIE ratio is 1.20, which suggests it has enough earnings to meet the required interest payments. B. Ferro's TIE ratio is 0.83, which suggests it does not have enough earnings to meet the required interest payments. C. Ferro's TIE ratio is 0.83, which suggests it has enough earnings to meet the required interest payments. D. Ferro's TIE ratio is 1.39, which suggests it does not have enough earnings to meet the required interest payments. E. Ferro's TIE ratio is 1.00, which suggests it has just enough earnings to meet the required interest payments.