B) True / False. 1. Higher Debt to Equity ratio means company has lower financial risk. [ ] 2. Increased Dividend per

Question

B) True / False. 1. Higher Debt to Equity ratio means company has lower financial risk. [ ] 2. Increased Dividend per Share is a good signal of a strong performance of company to shareholders. [ ] 3. The Price - Earnings ratio (P/E) is the relationship between market price per share and company’s earnings per share. [ ] 4. To calculate Inventory Turnover, a company divides Sales by Average Inventory. [ ] 5. Solvency measures a company’s ability to meet its short-term debt. [ ]

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S.No. Statement True/False Reason 1. Higher Debt to Equity ratio means company has lower financial risk. False Higher debt to equity ratio indicates company have more outside funding than own equity and hence more financial risk. 2. Increased Dividend per Share is a good signal of a strong performance of company to shareholders. True Increase dividend per share indicates increase in profit and hence a good signal. 3. The Price - Earnings ratio (P/E) is the relationship between market price per share and company’s earnings per share True P/E Ratio = Market share price per share/Earnings per share 4. To calculate Inventory Turnover, a company divides Sales by Average Inventory False Inventory Turnover Ratio = Cost of goods sold / Average Inventory 5. Solvency measures a company’s ability to meet its short-term debt False Solvency measures a company’s ability to meet its long term liability / obligation

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B) True / False

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Archived Solution

S.No.	Statement	True/False	Reason
1.	Higher Debt to Equity ratio means company has lower financial risk.	False	Higher debt to equity ratio indicates company have more outside funding than own equity and hence more financial risk.
2.	Increased Dividend per Share is a good signal of a strong performance of company to shareholders.	True	Increase dividend per share indicates increase in profit and hence a good signal.
3.	The Price - Earnings ratio (P/E) is the relationship between market price per share and company’s earnings per share	True	P/E Ratio = Market share price per share/Earnings per share
4.	To calculate Inventory Turnover, a company divides Sales by Average Inventory	False	Inventory Turnover Ratio = Cost of goods sold / Average Inventory
5.	Solvency measures a company’s ability to meet its short-term debt	False	Solvency measures a company’s ability to meet its long term liability / obligation