Indicate Whether Each of the Following Statements About Financial Statement

question 73

Short Answer

Indicate whether each of the following statements about financial statement analysis is true or false.
_____ a) Solvency ratios measure a company's long-term debt paying ability and its financial structure.
_____ b) A company with a high debt to assets ratio probably would be considered to have a high level of financial risk.
_____ c) The debt to equity ratio and debt to assets ratio are two ways to measure the same relationship.
_____ d) From the point of view of stockholders, a decline in the debt to equity ratio is always good news.
_____ e) The lower the debt to equity ratio, the higher a company's financial leverage.

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Definitions:

Foreign-Exchange Reserves

Stockpiles of foreign currencies maintained by a nation’s central bank. Obtained when the central bank sells local currency in exchange for foreign currency in the foreign exchange market.

Terms of Trade

This refers to the ratio at which a country's exports are exchanged for its imports, influencing the country's economic health.

Real Interest Rates

The interest rate adjusted for inflation, representing the true cost of borrowing and the real yield to lenders.

British Pound

The United Kingdom's currency, a major global currency involved in international trading.