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TRUE OR FALSE For company b, the receivables turnover ratio decreased in 2017 with respect to...

TRUE OR FALSE

  1. For company b, the receivables turnover ratio decreased in 2017 with respect to 2016. Therefore, its average collection period increased in that period.
  1. Net interest margin is defined as interest income minus cost of funding.
  1. The Price-to-earnings ratio (PE ratio) is useful as an indicator of debt, because it relates the earnings of a company to its stock price
  1. Because a firm that uses debt can be as profitable as a firm that does not, some financial ratios are calculated with NOPAT (Net Operating Profit After Tax) rather than with net income.
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Answer #1

A. Average collection period = 365/Receivables turnover ratio

The above formula shows that average collection period has an inverse relationship with receivables turnover ration. Hence, the statement is TRUE.

B. Interest Margin = Interest Income- Interest expense

Hence, as per the above formula, the statement is TRUE.

C.Price earnings ratio is the measure of earnings per share or per dollar invested in the stock. It does not measure the debt of the company.

The statement is FALSE.

D. The statement is TRUE.

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