Question

True or False

11. A put option purchaser expects a stock to fall.

12. A current ratio of only 1 suggests a company is illiquid.

13.A TIE (interest coverage) ratio of 72 would imply management is not doing well.

14. A company's pricing power is shown in its operating margin.

15. Capital budgeting focuses on after tax profits.

16.The gold standard in capital budgeting focuses on NPV.

Answer 1

Question 11 : True

A put option is the right to sell a option at a particular price and the purchaser expects the stock price to fail.

Question 12: True

A satisfactory current ratio is 2:1, below that ratio the company is considered as Illiquid because all of the current ratio would not be readily available to sell to cover the short term obligations because current assets include inventory also.

Question 13: False

A Times itnerest ratio of greater than 2.5 indicates that company has adequate earnings to pay off the interest.

Question 14: True

The Operating margin measures the company performance on the basis of it's operating activities and sales, therefore, the statement is true

Question 15: False

Capital Budgeting focuses on after tax cash flow not the profits.

Question 16: True

The Gold standard technique in the Captial budgeting is known as Net present value.