Indicate Whether Each of the Following Statements About Financial Statement

question 44

Short Answer

Indicate whether each of the following statements about financial statement analysis is true or false.
1. The value of a corporation's price-earnings ratio indicates how optimistic investors are about a company's growth potential.
2. The dividend yield ratio indicates the percentage of a company's net income that it paid out in dividends.
3. Conservatism produces a positive bias in a company's financial statements and thus in the ratios calculated from the financial statements.
4. Changes in general economic conditions (such as rate of inflation) can cause the values for a company's financial statement ratios to change from one year to the next.
5. Comparing financial statement ratios of companies in different industries can give misleading results.

---

Definitions:

Coupon Payments

Periodic interest payments made to bondholders, typically on a semi-annual basis, based on the coupon rate of the bond.

Municipal

Relating to a city or town or its governing body.

Sinking Fund

A reserve fund established by a company to set aside revenue over time for the purpose of paying off debt or replacing a major asset in the future.

Bond Issue

The act of a borrower issuing bonds to raise money from investors willing to lend them money for a certain amount of time.