TRUE or FALSE

1.A high current ratio could indicate that the firm has too much obsolete inventory and to many old accounts receivable that may all be collected.

2.A high current ratio might indicate too much cash, receivables, and inventory relative to its sales and are not being managed efficiently.

3.Inventory are the assets on which losses are least likely to occur in the event of liquidation.

4.Total assets turnover (TATO) ratio measures the turnover of all of the firm's assets.

5.A firm that has debts is better off because the use of debt lowers taxes and leaves more of the firm's operating income available to its investors.

6.If the rate of return on assets exceeds the interest rate on debt, a firm can use debt to acquire assets, pay the debt's interest and the rest to be given to stockholders

7.The lower the TIE ratio, the greater the likelihood that the company could cover its interest payments without difficulty.

8.Return on common equity (ROE) reflects the effects of all of the other ratios and it's not the single best accounting measure of performance.

9.A high ROE, achieved by using a high debt, might result to a lower stock price than by using less debt resulting to lower ROE.

10. Liquidity ratios are used by investors in deciding to buy or sell a stock.

11. Firms having high growth & low risk have high market/book (M/B) ratios.

12. TATO tells how many times the profit margin is earned each year.

13. Raising ROE through the use of leverage may not be a good move.

14. ROE considers the amount of invested capital.

15. In considering projects to take, a project's ROE must be combined with its size and risk to determine its effect on shareholder value.

16. Ratio analysis is used by managers to help judge the firm's ability to repay its debt.

17. Ratio analysis is used by stock analysts to help analyze, control, and thus improve the firm's operations.

18. It is difficult to generalize whether a particular ratio is "good" or "bad".

19. A high current ratio always indicates a strong liquidity position.