nt: Homework 4 True-False 04-001 Ratio analysis involves analyzing financial statements to help appraise a firm's...

Question

Question

Answer 1

Answer #1

1). The statement is TRUE as ratio analysis helps in finding company's liquidity, operational efficiency and profitability.

2). TIE Ratio = EBIT / Interest Expense

= [Sales - Operating Costs] / Interest Expense

= [$510,000 - $362,500] / $12,500 = $147,500 / $12,500 = 11.80

So, Option "e" is correct.

3). Market Price per share = Book Value per share * [Market/Book Ratio]

= $14.55 * 1.4 = $20.37

P/E ratio = Market Price per share / EPS = $20.37 / $1.50 = 13.58x

Answer 2

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