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Category: Multiple Problems
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# A firm with a Current Ratio of 2.0 is twice as profitable

### Resolved Question:

1. A firm with a Current Ratio of 2.0 is twice as profitable as a firm with a Current Ratio of 1.0.
True or False

2.All other factors being equal, a company that uses debt financing will have a higher return on equity (ROE) ratio than one that does not.
True or False

3.In general, firms want their Times Interest Earned ratio to be as low as possible.
True or False

4. A company whose Total Asset Turnover ratio is 1.0 is using its assets more efficiently than one whose ratio is 2.0.
True or False

5. A firm which has a relatively large amount of cash, accounts receivable, and inventory on its books and a relatively small amount of current liabilities would be considered:
liquid
profitable
risky
nuts

6. If a firm's current ratio is less than 1.0, it indicates that:
The firm had negative net income for the year
The firm will be unable to pay its short term loans which come due this year
Current Assets are less than Current Liabilities
The firm is insolvent

7. If a firm's PE ratio was 22, you would know that:
Profits over Earnings = 22
The firm will probably not have any trouble meeting its debt obligations this year
The firm's stock price is expected to increase 22%
Investors are willing to pay 22 times the firm's EPS for a share of the firm's stock.

8. The Du Pont equation allows you to gain additional insight into a firm’s
Liquidity
Sources of ROE
Sales potential
Sources of income

Submitted: 1 year ago.
Category: Multiple Problems
Expert:  linda_us replied 1 year ago.
linda_us, Master's Degree
Satisfied Customers: 7201
Experience: A tutor for Business, Finance, Accounts and other related topics.

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