Which of the following is an advantage of EV/EBITDA ratio compared with P/E ratio? A. EV/EBITDA ratio considers depreciation charges. B. EV/EBITDA ratio includes all the firms' cash reserves. O C. EV/EBITDA ratio considers firms' debt financing. D. EV/EBITDA ratio focuses on the equity side of firms.

Which of the following is an advantage of EV/EBITDA ratio compared with P/E ratio? A. EV/EBITDA ratio considers depreciation charges. B. EV/EBITDA ratio includes all the firms' cash reserves. O C. EV/EBITDA ratio considers firms' debt financing. D. EV/EBITDA ratio focuses on the equity side of firms.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter12: Fainancial Statement Analysis

Section: Chapter Questions

Problem 20MCQ

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The cost of equity is ________. Group of answer choices A. the interest associated with debt B. the rate of return required by investors to incentivize them to invest in a company C. the weighted average cost of capital D. equal to the amount of asset turnover
Which of the following is true regarding the debt to equity ratio? a. The debt to equity ratio is a stringent measure of liquidity. b. The debt to equity ratio measures the productivity and desirability of the equity investment. c. The debt to equity ratio measures management’s ability to productively employ all its resources. d. The debt to equity ratio measures the capital structure of the entity. would D be the correct answer?
The cost of equity is ________. a.equal to the amount of asset turnover b.the interest associated with debt c.the weighted average cost of capital d.the rate of return required by investors to incentivize them to invest in a company
13. A short-term creditor would be interested in A. profitability ratio. B. efficiency ratio. C. liquidity ratio. D. leverage ratio. The quick ratio of a firm would be unaffected by which of the following? 14. A. Land held for investment is sold for cash. B. Equipment is purchased, financed by a long-term debt issue. C. Inventories are sold for cash D. Inventories are sold on a credit basis.
The financial ratios which address the question: Has the firm earned adequate returns on its investments? O Efficiency ratios O Liquidity ratios O Profitability ratios O Working Capital ratios.
1. Which of the following pairs of financial statement analysis tool will be given more emphasis by a firm that is considering whether to grant trade credit or sell on account to a new client? Choices: Current and cash ratio Return on sales and return on asset Debt and debt-to-equity ratio Book value and price-to-earnings ratio 2. It is assumed that the Cost of equity and rate of return are both constant under Walter's Model of Dividend Relevance, if the cost of equity is higher than the rate of return, it is optimal that Choices: No dividend to be given to shareholders None of the choices is correct. The firm is indifferent as to distribute dividends or to reinvest the income All the earnings for the period shall be distributed to shareholders 3. Which of the following is correct with regards to cash discounts offering? Choices: These are granted because customer acquires high quantity of products and goods It is used lengthen the cash conversion cycle without putting pressure…
____ indicate the ability of the firm to meet its short-term financial obligations. a. Profitability ratios b. Liquidity ratios c. Leverage ratios d. Activity ratios
Refer to Exhibit 4.1 What is the firm's total debt to total capital ratio? Do not round your intermediate calculations.
Is there a readily recognisable debt-to-equity ratio that maximises a firm's value? What are your reasons for or against?
When we compute the EV/EBITDA multiple, i.e. the ratio of Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortization, we estimate the enterprise value of a firm by adding the values of debt and equity and netting out cash. Could you provide a reason for netting out cash? O a. Cash can be used to pay down debt. O b. Cash is easy to value. O c. None of the given answers is correct. The income from cash is not part of EBITDA. Cash is liquid. O d. O e.
The ratio group most likely to be used to indicate a firm's ability to meet short-term financial obligations would be ____. a. activity ratios b. financial leverage ratios c. profitability ratios d. liquidity ratios
Which of the following provides the best description of the liquidity ratios? Current ratio is the strictest test for a firm's liquidity position. If Firm A has higher values of all liquidity ratios than Firm B, and both firms are in the similar industry, then Firm A is managing its liquidity better than Firm B. The quick ratio regards inventory as part of the current assets because it's more liquid than other types of current assets. Cash ratio between 0 and 0.5 is considered a safe range for a firm's liquidity. 00