You Are Considering an Investment in IBM Stock and Wish

question 26

Multiple Choice

You are considering an investment in IBM stock and wish to assess the firm's long-term debt-paying ability and its use of debt financing.All of the following ratios can be used to assess solvency except:

• A)Number of times interest is earned.
• B)Debt to assets ratio.
• C)Debt to equity ratio.
• D)Net margin.

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Definitions:

Operating Loss Carryforward

Future reductions in taxable income allowed due to losses incurred in previous periods.

Temporary Differences

Differences between the book basis and tax basis of an asset or liability that result in taxable or deductible amounts in future years.

Intraperiod Income Tax Allocation

The process of assigning income tax expenses or benefits to different components of comprehensive income within the same financial period.

Marginal Income Tax Rate

The percentage of tax applied to your income for each additional dollar of income.