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