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2. Which one of the following ratios is used to calculate the interest coverage ratio? A) Pretax profit/EBIT B) EBIT/Interest expense C) EBIT/Sales D) Net
2. Which one of the following ratios is used to calculate the interest coverage ratio?
A) Pretax profit/EBIT
B) EBIT/Interest expense
C) EBIT/Sales
D) Net profit/Interest expense
3. Which of the following is correct?
I. ROE is less than ROA if debt/equity ratio is between 0 and 1
II. ROE increases with profit margin
III. Higher ROE means lower ROA, holding everything else equal
IV. ROA always increases with the leverage
A) II only
B) I and II only
C) III and IV only
D) I, II, and III only
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