[amp_mcq option1=”A Higher Receivable Turnover is not desirable” option2=”Interest Coverage Ratio depends upon Tax Rate” option3=”Increase in Net Profit Ratio means increase in Sales” option4=”Lower Debt-Equity Ratio means lower Financial Risk” correct=”option4″]<\/p>\n
The correct answer is D. Lower Debt-Equity Ratio means lower Financial Risk.<\/p>\n
A higher receivable turnover is desirable because it means that a company is collecting its receivables more quickly. This can lead to improved cash flow and a lower risk of bad debts.<\/p>\n
The interest coverage ratio is a measure of a company’s ability to pay its interest expenses. It is calculated by dividing earnings before interest and taxes (EBIT) by interest expense. A higher interest coverage ratio indicates that a company is better able to pay its interest expenses, which means that it is less risky.<\/p>\n
The net profit ratio is a measure of a company’s profitability. It is calculated by dividing net income by sales. A higher net profit ratio indicates that a company is more profitable. However, an increase in net profit ratio does not necessarily mean that sales have increased. It is possible for a company to increase its net profit ratio by reducing its expenses, even if its sales remain the same.<\/p>\n
The debt-equity ratio is a measure of a company’s financial leverage. It is calculated by dividing total debt by total equity. A higher debt-equity ratio indicates that a company is more leveraged, which means that it is using more debt to finance its assets. This can be risky, because if interest rates rise, the company’s interest expenses will increase, which could lead to financial problems.<\/p>\n
Therefore, the correct answer is D. Lower Debt-Equity Ratio means lower Financial Risk.<\/p>\n","protected":false},"excerpt":{"rendered":"
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