Question

1. True or False? The larger the firm's TIE ratio, the less times a firm can pay its interest expenses.

2. True or False? Your firm has a debt to equity ratio of 55%, and its biggest competitor has a debt to equity ratio of 66%. Based on this information, your firm is less levered.

3. True or False? A dividend payout ratio larger than 50% indicates a firm retains more than it pays out to shareholders.

4. True or False? A TIE ratio of 14.56x indicates a firm can pay its interest expense nearly fifteen times over.

5. True or False? A firm's earnings per share shows a firm's earnings potential over a specific quarter.

6. True or False? A quick ratio of less than one is considered good or favorable

7. True or False? A larger profit margin is preferable.

8. True or False? Your firm has a return on assets of 6.75%, and its biggest competitor has a return on assets of 4.56%. Based on this information, your firm is lagging its competitor.

9. True or False? A higher DSO ratio indicates a firm is better at pulling in receivables.

10. True or False? Firm's with larger inventory turnover ratios are more efficient at moving inventory.

11. True or False? A higher price to earnings ratio is not always preferable. PE should always be supplemented with a firm's PEG ratio.

12. True or False? The PEG ratio is scaled by growth. Generally, a PEG ratio of less than two indicates heavy growth potential in an investment.

13. True or False? Investors interested in dividend payments should focus on firms with larger payout ratios and/or larger dividends per share.

14. True or False? Ratios can be used to compare firms of all sizes and industries against each other.

15. True or False? Nordstrom has a current ratio of 1.78 and a quick ratio of 0.69. Based on this information, it appears Nordstrom may have an inventory issue.

Answer 1

Answer to first question in the list: FALSE Reason: TIE ratio stands for Times Interest Earned ratio. This ratio tells how many times the interest expense the firm is able to generate its earnings before interest and taxes (EBIT). The more the ratio, the more the efficiency because firm can easily meet out its interest expense obligation for the reporting period concerned. In other words, the larger the firm's TIE ratio, the more times a firm can pay its interest expenses. So, given statement is false. By formula, TIE ratio = EBIT for the reporting perioed / Interest Expense for the reporting period.