Question

Which of the following is not a true statement? Select one: a. The debt to equity...

Which of the following is not a true statement?

Select one:

a. The debt to equity ratio measures a company's risk and is calculated as total liabilities divided by stockholders' equity.

b. Leverage enables a company to earn a higher return using debt than without debt if the company can earn a rate of return higher than the cost of borrowing.

c. The acid test ratio is a more conservative measure than the current ratio.

d. The higher the current ratio, the greater the company's leverage.

0 0
Add a comment Improve this question Transcribed image text
Request Professional Answer

Request Answer!

We need at least 10 more requests to produce the answer.

0 / 10 have requested this problem solution

The more requests, the faster the answer.

Request! (Login Required)


All students who have requested the answer will be notified once they are available.
Know the answer?
Add Answer to:
Which of the following is not a true statement? Select one: a. The debt to equity...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Similar Homework Help Questions
  • Which of the following statements is true of the debt to equity​ ratio? A. The higher the debt to equity​ ratio, the gre...

    Which of the following statements is true of the debt to equity​ ratio? A. The higher the debt to equity​ ratio, the greater the​ company's financial risk. B. If the debt to equity ratio is less than​ 1, the company is financing more assets with debt than with equity. C. If the debt to equity ratio is greater than​ 1, the company is financing more assets with equity than with debt. D. The higher the debt to equity​ ratio, the...

  • Crosby Company has provided the following comparative information:     20Y8     20Y7     20Y6     20Y5     20Y4 Net income $5,571,720...

    Crosby Company has provided the following comparative information:     20Y8     20Y7     20Y6     20Y5     20Y4 Net income $5,571,720 $3,714,480 $2,772,000 $1,848,000 $1,400,000 Interest expense 1,052,060 891,576 768,600 610,000 500,000 Income tax expense 1,225,572 845,222 640,320 441,600 320,000 Total assets (ending balance) 29,378,491 22,598,839 17,120,333 12,588,480 10,152,000 Total stockholders’ equity (ending balance) 18,706,200 13,134,480 9,420,000 6,648,000 4,800,000 Average total assets 25,988,665 19,859,586 14,854,406 11,370,240 8,676,000 Average total stockholders' equity 15,920,340 11,277,240 8,034,000 5,724,000 4,100,000 You have been asked to evaluate the historical performance...

  • Answer the following (True or False): 1. Current liabilities divided by current assets gives the current...

    Answer the following (True or False): 1. Current liabilities divided by current assets gives the current ratio: 2. The quick ratio is the same as the current ratio except that, in the quick ratio, the accounts receivable are not included in the current assets: 3. The total liabilities to total equity ratio is one of several long-term solvency ratios. 4. High financial leverage is indicated by a low debt to equity ratio 5. A company may have a net income...

  • The extent of financial leverage in a firm Debt ratios measure the proportion of total assets...

    The extent of financial leverage in a firm Debt ratios measure the proportion of total assets financed by a firm's creditors. Cute Camel Woodcraft Company has a debt-to-equity ratio of 3.80, compared to the industry average of 3.04. Its competitor Purple Lemon Woodcrafters, however, has a debt-to-equity ratio of 5.70. Based on what debt-to-equity ratios imply, which of the following statements is true? Purple Lemon's creditors face lesser risk than the average financial risk in the industry. Purple Lemon has...

  • 5. More on debt management ratios The extent of financial leverage in a firm Debt ratios...

    5. More on debt management ratios The extent of financial leverage in a firm Debt ratios measure the proportion of total assets financed by a firm's creditors. Fuzzy Button Brewers has a debt-to-equity ratio of 1.60, compared to the industry average of 1.92. Its competitor Cold Duck Brewing Company, however, has a debt-to-equity ratio of 1.28. Based on what debt-to-equity ratios imply, which of the following statements is true? O Cold Duck has a greater risk of bankruptcy than Fuzzy...

  • Using the financial ratios provided in Table 4.1 and the financial statement infor- mation presented below...

    Using the financial ratios provided in Table 4.1 and the financial statement infor- mation presented below for Costco Wholesale Corporation, calculate the follow ing ratios for Costco for both 2013 and 2014: a. Gross profit margin b. Operating profit margin c. Net profit margin d. Times-interest-earned (or coverage) ratio e. Return on stockholders' equity 1. 1 f. Return on assets g. Debt-to-equity ratio h. Days of inventory . Inventory turnover ratio j. Average collection period Based on these ratios, did...

  • 5. More on debt management ratios Aa Aa E The extent of financial leverage in a...

    5. More on debt management ratios Aa Aa E The extent of financial leverage in a firm Debt ratios measure the proportion of total assets financed by a firm's creditors. Cute Camel Woodcraft Company has a debt-to-equity ratio of 2.00, compared to the industry average of 2.40. Its competitor Purple Lemon Woodcrafters, however, has a debt-to-equity ratio of 1.60. Based on what debt-to-equity ratios imply, which of the following statements is true? O Cute Camel has greater financial risk as...

  • 4. Debt (or financial leverage) management ratios Companies have the opportunity to use varying amounts of...

    4. Debt (or financial leverage) management ratios Companies have the opportunity to use varying amounts of different sources of financing to acquire their assets, including internal and external sources, and debt (borrowed) and equity funds. Aunt Dottie's Linen Inc. reported no long-term debt in its most recent balance sheet. A company with no debt on its books is referred to as: O a company with no financial leverage, or an unleveraged company O a company with financial leverage, or a...

  • 1) the times interest earned ratio 2) the debt to equity ratio 3) the gross margin...

    1) the times interest earned ratio 2) the debt to equity ratio 3) the gross margin percentage 4) the return on total assets (total assets at the beginning of last hear were 13,070,000) 5) the return on equity(stockholders equity at the beginning of last year totaled 7,990,250) no change in common stock over two years 6) ks the companys financial leverage positive ir negative? $ 960.000 2,700.000 3.600.000 260.000 7.520.000 9.520.000 $17,040,000 $ 1.200.000 300,000 1.800.000 2.000.000 200.000 5,500,000 9.050.000...

  • TRUE/FALSE 1) The return on total assets ratio is not a profitability measure. 1) 2) The...

    TRUE/FALSE 1) The return on total assets ratio is not a profitability measure. 1) 2) The return on total assets can be calculated as profit margin divided by total asset turnover. 2) 3) A company that has days' sales uncollected of 30 days and days' sales in inventory of 18 days implies that inventory will be converted to cash in about 12 days. 3) 4) The higher the accounts receivable turnover, the less quickly accounts receivable are collečted.4) 5) Efficiency...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT