Which of the following statements are true about the interest-burden ratio?Check all that apply:If the company has no financial leverage, the interest-burden ratio will be equalto 1.A company with higher financial leverage will have a lower interest-burdenratio.if the company has no financial leverage, the interest-burden ratio will be equalto 0.It can be expressed as Net profits/Pretax profits.It can be expressed as EBIT/Interest Expense.

Interest burden ratio is also called as interest coverage ratio. It is a financial ratio that is…

Answered: Which of the following statements are…

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter14: Completing A Quality Audit

Section: Chapter Questions

Problem 24CYBK

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Which of the following statements are true about the interest-burden ratio? Check all that apply: It can be expressed as EBIT/Interest Expense. If the company has no financial leverage, the interest-burden ratio will be equal to 0. A company with higher financial leverage will have a lower interest-burden ratio. If the company has no financial leverage, the interest-burden ratio will be equal to 1. It can be expressed as Net profits/Pretax profits.
Which of the following statement is correct? Select one: O a. Return on assets is the ratio of net income after interest expense to total assets O b. All options are correct statement C. Average collection period is the average number of times it takes for the company's customers to pay their bills o d. Increase in the debt ratio indicate more reliance on debt as a source of financing
Comment on the following statements with suitable example: i. The ratio return on assets has net income in the numerator and total assets in the denominator. Explain how each part of the ratio could cause return on assets to fall. ii. Explain how return on assets could decline, given an increase in net profit margin. iii. If quoted market prices are not available, a personal financial statement cannot be prepared. Comment.
The balance in retained earnings is not affected by Choose net income. aluation of a company's ability to pay current net loss. issuance of common stock. dividends.
The return on assets ratio is a: Liquidity ratio. Solvency ratio. Profitability ratio. Market indicator ratio. O None of the above
Based on these calculations, which company appears to be more risky and which company appears to be more profitable? How can you tell? (Keep in mind that the current ratio and debt to equity ratio are "risk ratios" and the gross profit ratio and return on equity ratio are "profitability ratios").
Ratios: Which of the following ratios is not considered to be a test of profitability? Long-Term Debt to Total Capital Earnings Per Share Return On Assets Net Profit Margin
Which of the following is one measure of liquidity? a. Quick ratio b. Profit margin c. Times ineterst earned d. Debt-to-equity rati
High interest coverage ratio does not indicate O a. The ability to pay future dividends O b. No other answer is true O c. The ability to pay interest O d. The percentage of operating profit paid as an interest
The return which the debt holders get is called Select one: a. Profit b. Dividend c. Earnings d. Interest e. Cost f. None
What is Return to Equity? Interest paid on debt Revenue minus Costs Only Retained Earnings All of the Above
Q . Which of the following statements is not true?a) The return on shareholders’ funds can be calculated as profit after tax /total equity x 100b) The dividend cover ratio can be calculated from the Income statement andthe statement of cash flows and the answer will be the samec) The interest cover ratio can be calculated from the income statement andthe statement of cash flows and the answer will be differentd) The operating profit margin is also called the net profit margin

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