Question

True or False?

Leverage is created when a company accumulates significant amounts of Cash.

Companies have experienced significant increases in accounts receivable because of cash based sales in direct to consumer businesses.

Long-term Marketable Securities are not as liquid as Short-term Marketable Securities and needs to be segregated.
Including Cash and Cash Equivalents stockpiles in Current Assets distorts the value of current assets required to operate the business.
When companies have significant interest-bearing Noncurrent Liabilities, these are viewed as a source of Invested Capital.
The classic definition of ROIC treats Noncurrent Liabilities similar to the treatment of Debt, i.e., as a source of invested capital.
ROA rises with high levels of Intangible Assets.
ROE is increased with Debt levels.
The core operating business has a significantly different return profile than large Cash stockpiles and Intangible Assets.
There is a single widely accepted ROIC calculation.
ROE measures NOPAT / Equity.

Answer 1

1. FALSE. Leverage is the use of debt when undertaking an investment project.

2. FALSE. Significant increase in accounts receivable occurs due to credit sales and not cash sales.

3. FALSE. Cash& cash equivalents include those marketable securities which mature in less than 90 days. Since long term marketable securities are held for more than 12 months, they are non current assets.

4.TRUE. Large stockpiles affect the liquidity of the current assets